Petrol Price Hike

Petrol Price Hike

Within 24 hours of state election results oil marketing companies increased petrol prices by Rs 5 a litre, the steepest ever hike. This is the seventh time in 11 months that petrol prices have gone up and are set to upset household budgets, already reeling under the burden of higher food costs and loan instalments.

And as if this was not enough, you may have to deal with Rs 4 hike in the price of diesel and cooking gas cylinders could cost Rs 25-50 more. The ministerial panel on fuels is expected to take a call on raising these prices next week.

Since UPA returned to power in May 2009, petrol prices have gone up by over 50%. In the last one year alone the increase is of the order of 30%.

On top of this milk producers have increased prices by Rs 2 a litre, while home loan player HDFC on Saturday joined the likes State Bank of India andICICI Bank in increasing lending rates. HDFC raised rates by 50 basis points.

"It is very tough. Everything costs more, be it vegetables or milk. Mutton will soon be out of reach. This (petrol price) increase will put more burden on us," said Anshu Roy, a housewife living in Noida.

On their part, oil marketers argued that since the last revision on January 15, the mix of crude they buy has gone up to $118-119 a barrel, whereas the present pump price was tuned to around $95 a barrel. Petrol price was raised five months ago by Rs 2.52 per litre.

"We have been holding the price line for five months to avoid putting burden on consumers. Even now, we are passing only half the burden. We have been losing Rs 10.50 on a litre of petrol," R S Butola, chairman of India's biggest fuel retailer IndianOil Corporation, told TOI.

Butola said another revision was in the offing since higher crude prices and losses on fuel sales were forcing the company to borrow Rs 8,000 crore every month. "There's no option left. Our borrowings have exceeded Rs 67,000 crore...finances are under tremendous strain...the company can't go on."

Though household budgets are under strain, the pain might not be visible in the government's inflation numbers. After all, petrol accounts for just over 1% of the wholesale price index (WPI). A subsequent increase in diesel and cooking gas price would reflect part of the problem since these fuels have about 5% weightage in WPI. In any case, it will have a cascading effect as transportation cost will rise.

Inflation was estimated at 9% in March, which is much higher than the government's comfort level.

To escape the charge of cartelisation, the three state-run oil marketing companies would keep marginal difference of a few paise in their petrol prices. State-run retailers deliberately keep this difference to avoid charges of carterlisation from private refiner-marketers such as Reliance Industries, Essar Oil and Shell.

The oil ministry had been preparing for a round of price increase. Officials had secured the Election Commission's green signal to raise petrol price just after the last round of polling on May 10. It was, however, decided to wait till the fortnightly price review by the oil companies.

State-run oil marketers are free to revise petrol price but never do it without the oil ministry's cue.

Last heard, the firms were losing about Rs 10.50 a litre on petrol, Rs 16.76 on diesel, Rs 29.69 on kerosene and Rs 329.73 on a cooking gas refill. They have projected a loss of Rs 180,000 crore this fiscal, calculated at $110 per barrel of crude.

The government had on Tuesday deferred a ministerial panel's meeting to consider raising diesel and cooking gas prices. The ministerial panel was to meet on Wednesday to consider raising prices of diesel by Rs 2-2.50 a litre and cooking gas by Rs 25-50 per refill. The government controls price of diesel, cooking gas and kerosene.