No move to raise petrol, diesel prices, government sees no cause for panic due to turmoil in Iraq.

NEW DELHI: There is no immediate move to raise petrol, diesel or cooking gas prices, and the government sees no cause for panic due to the turmoil in Iraq, which has hoisted Brent crude oil prices to a nine-month high of $115 per barrel, petroleum minister Dharmendra Pradhan said on Friday.

"As of today, oil prices are not going to increase," he said. "There is no need to panic as the Basra area that supplies to India is safe."

The price India's crude-oil basket has risen $5 a barrel to $112 in the past few days. International prices have risen on fears that the Islamic militants who have taken control over tracts of northern Iraq could disrupt supplies from the Middle Eastern nation.

Pradhan said the government has asked oil marketing companies to prepare contingency plans. "We have asked them to source more crude from existing linkages other than Iraq and also procure more from spot-term markets."

He said crude supply from Iraq hasn't stopped and state-run oil marketing companies have already lifted 45% of the annual contracted quantity from that country. "Situation in Iraq is changing rapidly. We are closely watching the situation every day.

But we do not expect to impact our supplies. The Basra region is a Shia area and has been safe even during the Saddam Hussian crisis," Pradhan said.

The ministry was earlier expecting prices in India to come down. "Petrol prices would have come down, had the Iraq crisis not been there," he said. Earlier in the day, petroleum secretary Saurabh Chandra apprised the Prime Minister's Office on impact of Iraq crisis on India.

Oil refining companies said they held adequate stocks of crude oil and refined product, insulating them from a supply glitch unless there was a prolonged disruption in crude oil exports from Iraq and neighbouring countries.

State-run refining companies have already prepared contingency plans to face the situation.

They are under pressure from the government to be fully geared for any supply disruption because a shortage of oil can cripple the economy, while a flare up in crude prices can significantly raise fuel subsidies upset the country's fiscal calculations.

State-run oil companies sell diesel below the assumed market rate, while kerosene and cooking gas are supplied at a loss. Petrol is sold at market-linked prices.

The government has not changed kerosene prices for a long time because of political opposition to the move. The cabinet had agreed to decontrol diesel also, but the order was not implemented.

Oil firms have been allowed to raise diesel rates by about 50 paise per month to gradually align them with international rates and eventually decontrol the fuel.

Source : economictimes.indiatimes.com