The UPA Government on Wednesday finally
bit the bullet and announced a package comprising a mix of price
increases and duty changes to enable the public sector oil marketing
companies to combat high crude oil prices.
Speaking at a news
conference in New Delhi today, Petroleum Minister Murli Deora said that
petrol prices have been hiked by Rs5 per litre while diesel will be
costlier by Rs3 a litre. The Government has also increased domestic LPG
price by Rs50 per cylinder. There has been no hike in the prices of
kerosene.
A litre of petrol sold in New Delhi will now cost Rs50.52 per litre, and diesel will be Rs34.48 a litre. The revised fuel prices will come into effect from midnight.
The Government had
previously increased fuel prices in February, the first time since June
2006. Cooking gas prices had been capped since April 2005.
Deora said that India's
petrol price should ideally have risen by 50%, and diesel and cooking
gas prices should have doubled, to bring domestic prices in line with
international rates.
Separately, the Finance
Ministry announced a revision in customs duty and excise duty on crude
oil and petroleum products to help cushion the common man from the
impact of the price hike.
Customs duty on crude
oil has been removed from 5% at present. The customs duty on diesel and
petrol has been cut to 2.5% from 7.5% while on other products
(including ATF) the same is down to 5% from 10%.
Excise duty on petrol
and diesel will be trimmed by Re1 per litre each. Currently, excise
duty on petrol is Rs14.35 per litre while the same on diesel is Rs4.60
a litre.
Net loss of revenues to
the Government on account of the duty reduction on crude oil and
petroleum products is Rs226.6bn for the remainder of the fiscal year.
Today's price rises may add between 0.5% and 0.6% to wholesale price inflation, Petroleum Secretary M.S. Srinivasan said.
The fuel price hike
will cut under recoveries by Rs211.2bn while Rs226.6bn will come from
the duty cuts. Even after the relief package, OMCs will suffer a net
revenue loss of Rs200bn in the current fiscal year.
The subsidy burden of
the upstream oil companies will be Rs450bn and the Government will
issue oil bonds worth Rs946bn. Despite the bailout package announced by
the Government, there will be a shortfall of Rs419.22bn.
Shares of the public
sector oil firms Indian Oil Corp (IOC), Hindustan Petroleum Corp Ltd.
(HPCL) and Bharat Petroleum Corp Ltd. (BPCL) initially rose up to 4.4%
but later fell on concerns that the increase in prices was not adequate
for them to turn profitable.
Shares of carmakers and
two-wheeler manufacturers like Maruti, Tata Motors, Hero Honda and
Bajaj Auto extended losses after the fuel price increase. | 