The Hindu Business Line : Petrol price up Rs 4, diesel Rs 2

Beating the hike: Vehicles queue up at a petrol pump in the Capital on Monday before the new fuel prices come into effect from midnight. - Ramesh Sharma

New Delhi , June 5

Petrol and diesel consumers will have to fork out an extra Rs 4 and Rs 2 per litre (plus local taxes) respectively from midnight, with the Government today taking crucial decisions on petroleum products pricing as part of its efforts to tackle a "stressful situation" of under-recoveries faced by retail oil companies due to surging international crude prices. The last price revision was made in September 2005.

While leaving kerosene sold under public distribution system (PDS) and domestic liquefied petroleum gas (LPG) untouched, the Cabinet has decided on a integrated package involving a price increase in petrol and diesel, issuance of oil bonds worth Rs 28,000 crore, Customs duty reduction from 10 per cent to 7.5 per cent on petrol and diesel, restricting PDS kerosene supply to below poverty line families, and moving to a trade parity pricing mechanism for petrol and diesel to resolve the situation.

The Petroleum Minister, Mr Murli Deora, told newspersons later that the decision regarding the prices of the petroleum products reached today effectively cushions the common man from the unprecedented oil price increase in the international market. "Under the circumstances, the increase in the prices of petrol and diesel is only marginal."

The Petroleum Secretary, Mr M.S. Srinivasan, said that the oil marketing companies are likely to incur under-recoveries of Rs 73,500 crore in the current fiscal. However, after the latest hike, the gap would only be less than Rs 3,000 crore.

Stating that it would be an equitable distribution of burden sharing between the Government, oil companies, and the consumers, the Secretary said that the total impact of Customs duty reduction and shift from import parity to trade parity would be Rs 6,500 crore (Rs 4,100 crore for Customs duty and Rs 2,400 crore for the latter).

The price increases will have an impact of Rs 9,300 crore on the under-recoveries. Apart from discounts of Rs 2,500-3,000 crore from standalone refiners such as Reliance Industries, the Government is expecting Rs 24,000 crore of subsidy sharing by companies such as ONGC, Oil India, and GAIL.

Mr Srinivasan also said that the Rs 28,000-crore bonds are likely to be issued by the Finance Ministry in four equal instalments (Rs 7,000 crore at the end of each quarter in the current fiscal).

Reliance `undecided'

Reliance Industries Ltd, the private retailer of petroleum products, has not decided whether it will further raise petrol prices, said sources. It was only three weeks ago that the company had raised its retail petrol price by Rs 2 per litre (plus taxes).

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