Leaving Left red in face, Govt finally hikes petrol, diesel rates

Though they had been sounded by the Government, the Left parties reacted angrily to the announcement. CPI(M)’s Nilotpal Basu told The Indian Express: ‘‘Discussions were being held with the Left parties but we never anticipated such a steep hike. We are going to launch a massive agitation on the issue’’.

CPI leader D Raja said that the hike would have a ‘‘cascading effect’’ on general prices, affecting the common man and the economy. The Left has announced nationwide demonstrations against the hike on June 28, demanding that the decision be reversed.

‘‘We call upon the people all over the country to join together to register their strong protest by coming out into the streets and demonstrate their opposition on June 28. The Left parties call upon the government to reverse their decision and take measures which can absorb the burden of the increased international oil prices,’’ the CPI(M), CPI, RSP and Forward Bloc said in a joint statement.

The BJP also threatened a nationwide agitation if the Government did not reverse its decision.

International crude oil prices, however, continued to soar today with US light crude ruling above $53 per barrel. Though the spike in global oil prices and increase in duties warranted a hike of Rs 4.68 per litre in petrol, the government settled for Rs 2.50. Similarly, diesel price hike, announced after an hour-long debate in the Cabinet, was only Rs 2 per litre despite the need to raise it by Rs 5.13 per litre.

However, it is some reprieve for the oil marketing firms. According to senior officials of IOC and HPCL, on petrol and diesel front, losses will approximately come down by half. No change in LPG and kerosene prices means that downstream firms will share the burden, officials said.

Elaborating on the rationale for the price hike, Petroleum Minister Mani Shankar Aiyar said: ‘‘We have basically gone back to the principle of equitable burden sharing between the government, the consumers and the oil companies.’’

While the Government took substantial hit on its revenues when it lowered duties on LPG and kerosene in the budget, the public sector oil marketing companies will bear the uncovered part on petrol and diesel and also absorb over Rs 11 per litre loss on kerosene and Rs 130 per cylinder loss on LPG.

Aiyar said the upstream firms—ONGC, GAIL and OIL—will continue to share the revenue loss of oil marketing firms on LPG and kerosene this fiscal.

‘‘Our oil sector companies should not suffer cash loss. This is a one-time hike and we may consider reverting to the mechanism of fixing prices every fortnight only after international oil prices stabilise,’’ said Aiyar.

Meanwhile, petrol pumps across the country were on strike today on the issue of the dealers’ margin. Though technically it is not hoarding, in effect the pump dealers will get a higher price for their old stock. The issue of timing the price rise with the day of the strike might raise a few questions.