M A I N   N E W S

Petrol up by Rs 4, diesel by Rs 2
Manoj Kumar
Tribune News Service

New Delhi, June 5
Amid strong protests by the Left parties and a section of the ruling alliance, the Government today announced a hike in petrol prices by Rs 4 a litre and diesel by Rs 2 a litre with effect from midnight, while leaving domestic fuel LPG and kerosene untouched.

Revised petrol prices Rs/Litre
Delhi Kolkata Mumbai


New rate 47.51 51.07 53.50


Old rate 43.49 46.90 49.16


Increase  4.02  4.17  4.34  4.34

Revised prices of diesel Rs/Litre

Delhi Kolkata  Mumbai


New Rate 32.47  34.96 39.96 35.95
Old rate 30.45 32.87 37.57


Increase  2.02 2.09 2.39


The hike in prices would put an additional burden of about Rs 9300 crore on consumers, besides leading to a rise in prices of agricultural, manufacturing goods and services, heavily dependent on fuel prices.

“Under the circumstances the increase in the prices of petrol and diesel is only marginal while the common man’s fuels, domestic LPG and PDS kerosene have been left untouched,” said Petroleum Minister Murli Deora, after the Cabinet meeting took the decision.

The government would also issue interest bearing oil bonds worth Rs 28,300 crore to the oil companies, and reduce the customs duty on petrol and diesel from 10 per cent to 7.5 per cent to set off their burden after substantial increase in crude prices.

The hike in petrol and diesel price is, however, expected to have a cascading impact on the economy and may lead to rise in inflation already nearing 5 per cent. This rise will impact inflation by about 50 basis points, said economists.

The price of petrol in New Delhi has been raised by four rupees to Rs 47.49 a litre while diesel rose to Rs 32.45 a litre. Tax variations mean prices differ across India but they will rise by a similar amount.

The government last raised prices in September 2005 — by 7 per cent after a similar increase last June — but oil firms say retail prices have lagged record crude costs, which have risen around 20 per cent this year.

Ruling out any scope for rollback of prices, he said: “The government has taken utmost care while hiking the prices of petrol and diesel, and the decision has been taken after consultation with the allies and Left parties.”

But the hike in prices would have a detrimental impact on agriculture, small and medium scale enterprises besides hitting the pocket of owners of two wheelers and four wheelers.

Petroleum Secretary M.S. Srinavasan said: “The ministry will soon come up with a scheme to target highly subsidised kerosene for the families living below poverty line (BPL) while sparing the LPG distribution.”

He said: “After massive increase in crude oil prices now crossing $ 70 a barrel, the oil companies had to suffer an under-recovery of around Rs 73,500 crore this year. But with the change in price determination from import parity to trade parity (which would exclude insurance and other charges on imports), the new price would be linked to 20: 80 ratio of export-import price of oil products.”

It would imply, he said, that oil companies the oil companies the cut in customs duty would give a relief of around Rs 3300 crore to the oil companies, besides asking the upstream companies to offer trading margin of around Rs 2500 crore to the oil marketing companies.

He said as per the trade parity price, the oil companies would have suffered an under-recovery of Rs 67000 crore, but the hike and duty package announced today would give them a substantial relief, just leaving a gap of around Rs 3000 crore.

State firms such as Indian Oil Corp., Bharat Petroleum Corp. Ltd. and Hindustan Petroleum Corp. Ltd. had sought a 25 percent increase in petrol and diesel prices to make up their losses.



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