NEW DELHI: State-run fuel retailers on Monday decided to raise petrol price by 70 paise a litre from Tuesday, ending a short spell of good times that followed when pump rates were cut by nearly Rs 5 a litre in two tranches last month. The increase came a day after UPA candidate and former finance minister Pranab Mukherjee won the presidential poll. No wonder, many see the timing as a signal of the government’s resolve to take some hard economic decisions.
By all counts, this also indicates that an increase in diesel price may be round the corner. While it is almost certain, there’s a question mark over the timing of that decision. This is more so since the ministerial panel on fuels — like many other similar committees — is yet to be recast after Mukherjee quit the government to fight the presidential poll. Besides, the government may also not like to stir up a political hornet’s nest so close to Parliament’s monsoon session that begins on August 8.
Diesel, kerosene and cooking gas prices are controlled by the government which has given power to the ministerial panel to raise or reduce them. The timing of the petrol price increase also indicates that the state fuel retailers are firm on ending the predictability of a fortnightly routine — 15th and last day of the month — of reviewing prices. Unscrupulous dealers would hoard petrol when an increase was expected and refuse to lift stocks from depots when a cut was in the offing, putting consumers to disadvantage.
Market leader IndianOil Corporation said the latest increase was sparked by the twin factors of crude and petrol prices rising substantially in global bulk markets as well as a further drop in the rupee’s value against the dollar. Since petrol price was cut last time on June 29, the average price of the crude mix that India buys has risen to $101.3 per barrel, while price of motor spirit or gasoline — trade name for petrol — increased to $111.6 a barrel. The rupee-dollar exchange rate too has deteriorated to about Rs 55.36 to a dollar.
At the time of the last cut in pump price, petrol cost $106.9 a barrel in bulk markets and the dollar exchange rate stood at Rs 54.96. “At these levels, the oil companies are incurring losses of about Rs 1.4 per litre on petrol sales in the domestic market,” IndianOil said, adding that it has decided to pass on only part of this under-recovery in view of the situation.
