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Post-poll whammy: Brace for petrol price hike of Rs 4 a litre

Now that the Assembly elections are winding down, a sharp hike in fuel prices – and very likely diesel and cooking gas prices too – which would have been politically disastrous to implement earlier – is on the cards.

The hike in petrol prices is expected to be of the order of Rs 4 per litre, going by industry officials’ estimates of the losses they are incurring. By other estimates, cooking gas prices too could go up by Rs 70 per cylinder and diesel by about Rs 5 per litre.

This will be the first revision of fuel prices since 1 December. Although prices were intended to be recalibrated every fortnight in the spirit of “deregulation”, they had been put on hold for politically expedient reasons: the crucial round of Assembly elections. But oil marketing companies have been.

Industry officials point out that in December, internation oil prices were just short of $110 per barrel; today, they are above $120 per barrel. The oil industry claims that it has borne losses of about Rs 900 crore since the revision in December. The subsidy bill is edging close to Rs 1.5 lakh crore.

For finance minister Pranab Mukherjee, who has claimed he is losing sleep over the mounting subsidy bill, a frontloaded price hike ahead of the budget could help tidy up his balance-sheet, to the extent that it makes subsidy projections seem a trifle rosier.

Oil industry officials said that the diesel price hike too could come about before the Budget session of Parliament begins on 12 March.

State-owned oil firms claim they lose Rs 12.77 per litre on diesel, Rs 30.21 a litre on kerosene and Rs 378 per 14.2-kg domestic LPG cylinder. Indian Oil Corp. Bharat Petroleum and Hindustan Petroleum claim they lose over Rs 410 crore a day on sale of diesel, domestic LPG and kerosene.

Officials said that oil companies would themselves raise petrol prices, but a decision on the hike in diesel and LPG prices must await the Empowered Group of Minister (EGoM).

These decisions will also likely face opposition from the UPA allies like Mamata Banerjee, who had in November opposed such a price hike. Mamata had said then that her party would not compromise on its oppositoin to the fuel price rise. ““There is also talk of increasing diesel and LPG prices. Trinamool Congress is a pro-people party. Already people are overburdened with rising prices. We are not going to accept it,” Mamata said.

Those ancient quarrels will now likely be revived. The results from the Assembly elections in Uttar Pradesh may also determine the extent to which the UPA government will continue to be hemmed in by allies like Mamata.

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Posted by on Feb 28 2012. Filed under Business India News. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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