The Hindu Business Line : Petrol price goes up by Rs 2, diesel Re 1

The Government, after several weeks of dilly-dallying, on Thursday decided to hike the retail selling prices of petrol and diesel by Rs 2 and Re 1 a litre, respectively, effective Thursday midnight. The decision will benefit oil companies by Rs 840 crore in value terms for the remaining part of the current fiscal.

Considering the political sensitivity of the issue, a decision on auto fuel price hike was taken by the Cabinet Committee on Political Affairs (CCPA), which left kerosene and cooking gas prices untouched. It also decided to increase oil bonds issued by the Government to partially offset the impact of selling the four products below the cost price. The bonds will now cover 57 per cent of the total under-recoveries from the current 42.7 per cent.

The total under-recoveries on sale of four products – petrol, diesel, cooking gas and kerosene – are estimated at Rs 71,808 crore for the fiscal. With international crude prices soaring, the under-recoveries on the four products would have been over Rs 90,000 crore this fiscal, but for the appreciation in the rupee against the dollar and good refining margins earned by the refineries, said the Petroleum Secretary, Mr M.S. Srinivasan.

During the current financial year, the Government will issue oil bonds of about Rs 40,000 crore at the enhanced rates to the OMCs – Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation.

“We tried our best not to increase fuel prices but it had become impossible for the PSU OMCs to continue operations with losses mounting to about Rs 72,000 crore,” Mr Murli Deora, Petroleum Minister, told presspersons here after the CCPA decision.

Asked about the Left allies calling for a rollback, Mr Deora said he had spoken to Ms Brinda Karat of the CPI(M) and explained the strain caused by the rising international oil prices that touched the $100-a-barrel mark on January 2. The Indian crude basket in January averaged at $89.52 a barrel and the highest for the current fiscal stood at $94.62 on January 3.

The Petroleum Secretary said the Government on its part would bear a larger share of burden by raising the quantum of oil bonds. Of the estimated Rs 71,808 crore under-realisations on sale of four petroleum products, upstream firms such as ONGC and Oil India would bear one-third or Rs 24,000 crore. The burden on refiners – IOC, BPCL, and HPCL – would be of 8.4 per cent or Rs 6,100 crore of the total under-realisation.

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