Petrol dearer by Rs 2.35,diesel by 50 paise; bigger hikes soon
Petrol price was today hiked by a steep Rs 2.35 per litre and diesel by 50 paise ahead of a bigger increase in rates that may also include subsidised LPG planned for next month as falling rupee made imports costlier.
The increase in petrol price, the sixth hike in 3 months, and diesel, eighth since January, are excluding local sales tax or VAT and are effective midnight tonight, oil firms said.
Next month after Parliament session ends, diesel prices may see a one-time hike of Rs 3-5 per litre, kerosene of Rs 2 and LPG of Rs 50 per cylinder as Oil Minister M Veerappa Moily urged Prime Minister Manmohan Singh to take steps to tackle a record Rs 180,000 crore of losses arising from dipping rupee and surging oil rates.
Following today's decision, petrol price in Delhi will go up by Rs 2.83 to Rs 74.10 per litre while it will cost Rs 81.57 per litre in Mumbai as against Rs 78.61 currently.
In sixth hike since June petrol price has gone up by a massive Rs 9.17 per litre, excluding VAT. Price of petrol in Delhi has gone up by Rs 11.1 per litre after including state tax since June 1.
In a parallel move, diesel price was hiked by 50 paise, excluding VAT, in line with the January decision of the government allowing oil companies freedom to raise prices in small doses every month to wipe out mounting losses.
Diesel price in Delhi has been hiked by 57 paise to Rs 51.97 per litre while it would cost Rs 58.86 in Mumbai from tomorrow as compared to Rs 58.23 currently.
Today's hike in the eighth since the January 17 and most of the losses on diesel sales should have been wiped out by now to make the fuel market priced. But the fall in rupee, around 25 per cent since April, has worsened the situation and oil firms are losing Rs 12.12 per litre despite prices being raised by a cumulative Rs 4.75 this year.
Alongside, oil firms also raised rates of non-subsidised domestic cooking gas (LPG) that households buy after exhausting their quota of 9 subsidised or cheaper cylinder.
Price in Delhi was hiked by Rs 57.50 per 14.2-kg cylinder to Rs 932.50.
Oil firms had on June 1 raised petrol prices by 75 paise, excluding VAT, and followed it with a Rs 2 per litre increase on June 16, a Rs 1.82 increase on June 29, Rs 1.55 hike on July 15 and 70 paise increase from August 1.
Announcing the price increase, Indian Oil Corp (IOC) said deteriorating exchange rate has led to widening of losses on diesel from Rs 10.22 in first fortnight of August to Rs 12.12 per litre loss. The same has also led to widening of under-recoveries on kerosene to Rs 36.83 per litre from Rs 33.54 at the beginning of the company and on LPG to Rs 470 per cylinder from Rs 411.99.
Moily, who had on Thursday met Finance Minister P Chidambaram on the issue, on August 30 wrote to Singh saying without a price increase the government will have to shell out a record Rs 97,500 crore to subsidise diesel and cooking fuel.
"If the present position persists, the total under- recovery (revenue loss) would reach to a level of Rs 180,000 crore in the current financial year as compared to Rs 161,000 crore during 2012-13," he wrote to the Prime Minister.
A 25 per cent drop in rupee value has resulted in losses on diesel sales widening to Rs 12.12 per litre despite prices being raised by 50 paise a litre every month since January.
This coupled with losses on kerosene and LPG, the total revenue loss this fiscal comes to Rs 180,000 crore, he said adding even after upstream firms like ONGC chip in Rs 70,500 crore, a gap of Rs 97,500 crore would be left.
Moily, who sent an almost identical note to Chidambaram, said a one rupee increase in diesel price will cut loss by Rs 4,522 crore in remainder of current fiscal while a Rs 3 per litre increase would trim losses by Rs 13,565 crore. If rates are raised by a one-time Rs 5 per litre, the losses would be cut to Rs 29,390 crore.
The hikes proposed are one-time and are outside monthly revision in rates of 50 paisa happening since January.
Similarly, a Rs 50 per cylinder increase in LPG rates would trim cooking gas losses by Rs 2,604 crore. Besides, a possible Rs 2 per litre hike in kerosene price would cut losses by Rs 1,014 crore. The price increases in the 3 items together would bring down government's subsidy outgo to Rs 50,928 crore, he argued.
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