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Furore Over Petrol, Diesel, LPG, Kerosene Price Hike

New Delhi | Jun 25, 2010In a politically sensitive move, the government today hiked prices of petrol by Rs 3.50 a litre and

diesel by Rs 2 a litre, raised LPG by Rs 35 a cylinder and the poor man's cooking fuel kerosene by

Rs 3 a litre. Petrol prices will be decontrolled from midnight tonight leading to Rs 3.50 a litre hikein rates in Delhi and diesel rates will be linked to market prices in stages, Oil Secretary S

Sundareshan said after a meeting of an Empowered Group of Ministers chaired by Finance MinisterPranab Mukherjee. "For the present, an increase of Rs 2 per litre in diesel prices has been

approved," he said. Prior to the hike, petrol in Delhi cost Rs 47.93 a litre and diesel Rs 38.10 per

litre. The government is decontrolling petrol prices after a gap of six years and together withincrease in diesel, LPG and kerosene rates, the move would lead to a 0.9 percentage points surge in

inflation. Opposition parties launched a scathing attack on the government for the unpopulardecision, saying it would hit hard the masses already reeling under soaring prices. Sources said

NCP supremo and Agriculture Minister Sharad Pawar told the EGoM that the decisions should not

be rolled back. However, some allies, including Trinamool Congress leader and Union CabinetMinister Mamata Banerjee, who stayed away from the EGoM meeting, demanded roll-back of the

hike that would lead to an inflation spiral.

"The important thing is that the government will continue to subsidise common man's cooking fuels

- LPG and kerosene," Petroleum Minister Murli Deora said while emphatically stating that none ofthe members present at the EGoM gave a dissenting note. Sources said DMK leader M K Alagiri,

whose party voiced opposition to the move after the decision, had brought a paper outlining hisparty's reservations on the move but did not circulate it. "I know Banerjee is in town but I don't

know why did not attending the meeting," Deora said. "All others were very cooperative. (DMK

leader and Fertilizer Minister) M K Alagiri and (Agriculture Minister) Sharad Pawar were inagreement with these decisions." Giving details of the decision, Sundareshan said that there was,

however, no move to end subsidy on LPG and kerosene and added that diesel that is now being soldat a loss of Rs 3.80 per litre would also be eventually priced at market rate.

The hike in petrol and diesel prices is the third this year. Rates where first hiked on February 27

when Finance Minister raised duties on the two fuel and prices were again revised on April 1 onaccount of introduction of Euro-IV compliant motor fuels. LPG in Delhi costs Rs 310.35 per 14.2-

kg cylinder since April 1 when the state government withdrew subsidy on the fuel. The last majorrevision in kerosene price, which currently costs Rs 9.32 per litre in Delhi, was on March 1, 2002

when rates were hiked by about Rs 1.60 per litre. Sundareshan said today's decisions will help bring

down the revenue oil PSUs lose on selling fuel by about Rs 21,000 crore to Rs 53,000 crore. "This(Rs 53,000 crore) under recovery will be borne by the Government and upstream oil companis like

ONGC," he said. The government's own economic adviser Kaushik Basu said monthly inflation,currently at 10.16 per cent, could go up by 0.9 percentage points as a result of the decision.

Sundareshan said decontrol of petrol price would result in reduction in under recoveries (revenueloss) of oil PSUs by Rs 7,000 crore. Before today's hike, the oil PSUs were projected to lose Rs74,300 crore on selling petrol, diesel, domestic LPG and kerosene below cost. Diesel price hike

would cut revenue loss by Rs 9,000 crore and cooking fuel price increase would help them garnerRs 5,000 crore. A lower fuel subsidy bill may help the government reduce the fiscal deficit

substantially. It was an estimated 6.9 per cent last year. The move would also help private retailers

like Reliance Industries and Essar Oil who had in 2008 mothballed their petrol pumps nationwideafter they couldn't match prices offered by state-run rivals.

The EGoM decision were based on recommendations of the expert group headed by formerPlanning Commission member Kirit Parikh. The group had called for freeing petrol and diesel

prices from state control and raising LPG rates by Rs 100 per cylinder and kerosene by Rs 6 perlitre.

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The NDA government had in April 2002 freed petrol and diesel prices from government control and

allowed Indian Oil, Bharat Petroleum and Hindustan Petroleum to fix prices on 1st and 16th ofevery month based on the fortnightly average of international rates. This practice was stopped just

before the General Elections in 2004. The UPA Government in June 2004 formally took over the

task of fixing auto fuel prices.

Following are the revised rates of petrol, diesel, domestic LPG and kerosene after today's decisionof the Government to raise prices:

PETROL (in Rs/Litre)Current Price Revised Price Increase

Delhi 47.93 51.43 3.50

Kolkata 51.67 55.32 3.65

Mumbai 52.20 55.88 3.68

Chennai 52.13 55.92 3.79

DIESEL (in Rs/Litre)Current Price Revised Price Increase

Delhi 38.10 40.10 2.00

Kolkata 37.99 39.94 1.95

Mumbai 39.88 41.98 2.10Chennai 38.05 40.07 2.02

LPG (in Rs/cylinder)Current Price Revised Price Increase

Delhi 310.35 345.35 35.00

Kolkata 328.70 365.10 36.40

Mumbai 313.45 348.45 35.00

Chennai 315.95 352.40 36.45

KEROSENE (in Rs/Litre)Current Price Revised Price Increase

Delhi 9.32 12.32 3.00

Kolkata 9.75 12.72 2.97

Mumbai 9.27 12.27 3.00