Govt hikes fuel prices, Left demands roll back

The Cabinet Committee on Political Affairs, which took up the matter instead of the Cabinet Committee on Economic Affairs because of the political sensitivity of the issue when general elections are not far away, however, decided against lowering duties to cushion the impact of surging international oil prices.

"Petrol and diesel prices will be increased from midnight tonight," Petroleum Minister Murli Deora told reporters in New Delhi.

The CCPA decided to raise the quantum of oil bonds to be issued to state-run oil retailers to partly compensate them for selling auto and cooking fuel below cost, he said.

Presently, 42.7 per cent of the under-realisation on petrol, diesel, LPG and kerosene is met by the government through issuance of oil bonds. This percentage has now been raised to 56-57, Petroleum Secretary M S Srinivasan said.

Government, in this financial year, will issue Indian Oil, Bharat Petroleum and Hindustan Petroleum oil bonds worth over Rs 40,212 crore at the enhanced rates.

Upstream firms like ONGC and GAIL would chip in 33 per cent (Rs 23,700 crore), while the remaining of the Rs 71,808 crore under-realisation would be borne by the retailers.

A Rs two per litre increase in petrol price would give Rs 180 crore a month additional revenue to public sector oil companies while Re one a litre hike in diesel would fetch Rs 360 crore a month.

"For the remaining part of the fiscal, we anticipate additional revenue of Rs 840 crore," Srinivasan said.

Officials said Finance Minister P Chidambaram opposed the Petroleum Ministry's demand for a Re one per litre reduction in excise duty on petrol and diesel.

The state-run firms lose Rs 10.57 per litre on petrol, Rs 11.56 on diesel, Rs 19.89 on kerosene and Rs 331 on each LPG cylinder.

Earlier, a Group of Ministers headed by External Affairs Minister Pranab Mukherjee had left a decision on fuel prices to the Cabinet after the panel was divided in the middle on the issue. Petroleum Minister Murli Deora insisted on a duty cut rather than price hike, while Finance Minister P Chidambaram was opposed to any pre-Budget duty rejig.

Petrol and diesel prices were last raised in June 2006, when crude oil was at 67 dollars a barrel. It is at 92 dollars a barrel this year. LPG prices were last raised by Rs 20 per cylinder in November 2004 when crude was at 34 dollars a barrel. Kerosene prices have not been changed since 2002 when crude was at 23 dollars per barrel.

Left parties demand roll back in petrol, diesel prices

Strongly opposing government's decision to hike the prices of petrol and diesel, Left parties on Thursday demanded its roll back and called for nationwide protests saying the move would contribute to the overall inflation which has already badly hit the common man.

"We protest this decision and will organise widespread protests against it. This hike was not necessary and should be withdrawn," CPI(M) Politburo member Sitaram Yechury said in New Delhi.

He said government's "initial idea" was to hike petrol prices by Rs 12-16, diesel prices by Rs 12, kerosene by Rs five and LPG cylinder by Rs 150 to meet the under-recoveries.

But the increase announced by the Union Cabinet on Thursday was only by Rs two for petrol and Rs one for diesel.

Maintaining that the outside supporters would demand a roll back of this hike, he said even this rise would not have been necessary if the government had restructured the ad valorem tax structure on import of petro products.

"As global oil prices rise, government's tax revenue also grows. The extra earnings of the government due to this could have been returned to the oil companies to improve their financial position. Then there would have been no need to raise the prices and burden the already burdened common man," the CPI(M) leader said.

He said since the UPA came to power four years ago, the government had decided to hike prices twice but was forced to roll back due to Left pressure.