New Delhi: The Government on Monday decided to raise petrol prices by Rs. 4 a litre and diesel by Rs. 2 but spared kerosene and liquefied petroleum gas (LPG). The decision came after three months of confabulations within the United Progressive Alliance (UPA) Government and with allies such as the Left parties, who argue that taxes need to be cut instead of merely raising prices.

The Cabinet, however, decided to raise prices of petrol and diesel and also reduce the customs duty levied on them from 10 to 7.5 per cent. In addition, the Finance Ministry has been directed to issue bonds to the oil marketing companies (OMCs) for Rs. 28,000 crore. Upstream companies have also been asked to make their contribution by subsidising the OMCs to an extent of Rs. 24,000 crore in the current fiscal.

After a Cabinet meeting, Petroleum and Natural Gas Minister Murli Deora said the decision to spare kerosene and LPG had been taken as the weaker sections of society used them. The diesel price hike was minimal, as it was used by farmers, who were facing distress conditions.

The proposal of the Rangarajan Committee on oil pricing to shift from import to trade parity had also been accepted, which had brought down the burden on the oil companies.

The under-recoveries of the OMCs had been pegged at Rs. 73,500 crore but they had now been brought down to about Rs. 3,000 crore as a result of these measures. The hike in prices would yield Rs. 9,300 crore in a single year while the reduction in Customs duty and the shift to trade parity would yield Rs. 6,500 crore. Besides, a commercial discount from the standalone refineries would bring in about Rs. 3,000 crore.

Asked about the strong reaction of the Left parties, Mr. Deora pointed to the unprecedented rise in world oil prices, which now stood at about $73 a barrel. A price hike was inevitable; otherwise the "navaratna" oil companies would become loss-making companies. "The Government has taken extraordinary care to make the burden on the consumers minimal."

Even as the Left parties stridently opposed the move, the Congress expressed concern over its impact on the common man. Party spokesman Abhishek Singhvi said the Congress would like to convey "this feeling" to the Government.

The Communist Party of India (Marxist), which described the fifth hike in the prices of petroleum products in a little over two years as "unconscionable," demanded a rollback. Its Polit Bureau decided to consult other parties for a one-day all-India protest while asking its State units to stage agitations. CPI national secretary D. Raja said, "Already, there is a steep increase in the prices of all essential commodities. This oil price hike will have a cascading effect on inflation." On the note sent by the four Left parties to Prime Minister Manmohan Singh on Monday suggesting alternatives to the price hike, he said the latest increase could have been avoided.

The Janata Dal (Secular) said the increase in the price of diesel would affect farmers. The party said it would take the issue to the streets. Party president H.D. Deve Gowda will spell out the party's course of action at its convention in Lucknow.

Printer friendly page  
Send this article to Friends by E-Mail