Business Today

Petrol hike to add fuel to inflation fire

Petrol prices have gone up by close to Rs 13 per litre since January this year in four successive hikes. The price of the fuel was last increased by Rs 3.14 a litre on September 15.

Mail Today Bureau | November 4, 2011 | Updated 11:58 IST

The public sector oil companies hiked the price of petrol by Rs 1.80 per litre on Thursday, adding to the crushing inflationary burden
on the middle class.

Petrol will now cost Rs 68.64 a litre at filling stations in Delhi and even more in Gurgaon and Noida because of the higher state levies.

Petrol prices have gone up by close to Rs 13 per litre since January this year in four successive hikes. The price of the fuel was last increased by Rs 3.14 a litre on September 15, which had come on the heels of a hefty Rs 5 per litre hike on May 15.

The government has allowed the public sector companies to charge market-driven prices for petrol, which has increased the gap between petrol and diesel prices to around Rs 28 per litre.

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Diesel prices are still under government control, since it is a politically-sensitive fuel because of its use in the farm sector and for fuelling public transport.

This has also led to an increase in the demand for diesel-run cars and what is seen as an increasing "dieselisation" of the Indian economy.

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The oil companies claim that they had started making losses on petrol sales as the international crude oil is hovering at around $108 per barrel in international markets, while the rupee has depreciated from Rs 46.50 a dollar three months ago to over Rs 49 per dollar now, increasing the cost of oil imports.

Revised petrol price
The hike in petrol prices will fuel inflation further as commuting costs go up, adding to the burden on household budgets, which are already stretched with soaring prices of essential foodstuffs.

An Indian Oil Corp (IOC) official said the oil companies were losing Rs 1.5 per litre on petrol sales against the international price and after adding sales tax or value-added tax (VAT), a Rs 1.82 per litre hike would bring domestic prices in line with international prices of the fuel.

The petroleum ministry also wants to increase the prices of diesel, cooking gas and kerosene as the public sector oil companies claim that they are losing Rs 333 crore per day on the sale of these fuels at the current price level.

Petroleum minister Jaipal Reddy has sought a meeting of the Empowered Group of Ministers (EGoM) to discuss the issue.

Reddy said the EGoM meeting would take place before the winter session of Parliament that begins on November 22.

He added that his ministry would push for raising prices of all three regulated products - diesel, LPG and kerosene. However, the minister admitted that it would not be easy to arrive at a decision to raise prices.

The EGoM has been put in place to help evolve a consensus on the politically-sensitive issue of fuel prices and includes the Congress Party's key allies TMC, National Conference and DMK. In September, the Congress Party's allies had stonewalled the petroleum ministry's plans to limit the supply of subsidised LPG cylinders to four to six per household in a year in order to ease the burden on the oil companies and reduce the government's subsidy burden as well.

The public sector oil companies are currently losing Rs 9.27 per litre on sale of subsidised diesel, Rs 26.94 per litre on kerosene sold through the public distribution system (PDS) and Rs 260.50 per 14.2-kg LPG cylinder supplied to households.

Courtesy: Mail Today

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