Diesel prices hiked by Rs 3, kerosene and LPG to cost more

NEW DELHI: When you work out your household budget for July, in addition to existing woes, factor in higher prices of dal-chawal, fruits and vegetables, bus and taxi fares.

That's because the government on Friday decided to raise the price ofdieselby Rs 3 a litre, kerosene by Rs 2 a litre while cooking gas will cost Rs 50 more per cylinder.

Since the revision excludes local levies, the actual increase would be 50 paisa or so more inDelhiwhere diesel attracts 13.36% VAT. In states that have higher local taxes, the incremental increase could be Re 1 or even more.

The revision in the price of diesel, the main transportation fuel, would immediately push up cost of food items, bus and taxi fares, freight as well as any consumer good that is moved by road.

The revision comes about a month after state-run oil marketing companies jacked up petrol prices by Rs 5 a litre. It immediately drew a howl of protest from across the Opposition spectrum, including BJP, Left, JD(U) and AIADMK, who promised to take to the streets against the government's move, demanding a rollback. Even UPA allyTrinamool Congressjoined in.

Attempting a defence, oil ministerJaipal Reddysaid: "I am sandwiched between economists and populists. The economists say why aren't you doing it (raising prices) and populists say why are you doing it."

BJP spokesperson Nirmala Sitharaman described the move as "crude and insensitive". The party will organize sit-in protests in every district of the country in protest from Friday. CPM leader Sitaram Yechury attacked the government, saying the increase in diesel and kitchen fuel prices would add to the burden of the common people who were already reeling under high cost of daily living.

While deciding to raise the prices on Friday, the ministerial panel on fuels under finance ministerPranab Mukherjeealso pared customs duty on crude and motor fuels. The 5% import duty on crude was scrapped, while customs on petrol and diesel was reduced to Rs 2 per litre from Rs 4.60.

Reddy said the move was aimed at keeping the quantum of increase in consumer prices to a "modest and minimal" level. Asked whether UPA chiefSonia Gandhiwas consulted on the revision, he shot back: "I cannot give you a glimpse into my kitchen. I can only serve you the dishes."

The government would lose Rs 26,000 crore due to elimination of customs on crude. Reduction in excise duty on diesel would mean sacrificing Rs 23,000 crore. The increase in consumer prices would cover Rs 21,000 crore of losses state-run oil marketing companies run up on selling fuels at government-capped prices.

In spite of these measures, Reddy said, the companies would still be left with a Rs 120,000 crore loss this fiscal, calculated at $110/barrel price of crude. But he declined to say whether there would be more revisions ahead. "I cannot say about the future." Before the price revision, the companies were estimated to run up a loss of Rs 171,140 crore.

The only silver lining is that the reduction in customs duty on petroleum products has covered the Rs 1.98 oil marketers were losing on petrol, which is not controlled by the government. "The difference (between cost and retail price) is gone (on petrol). I can say there will be no need for raising petrol price (now)," Reddy said.

Diesel and cooking gas prices were last raised on June 25, 2010 by Rs 3.50 a litre and Rs 35 per cylinder, respectively. Some rollback in the price of cooking gas, however, cannot be ruled out as had happened in 2000 during the NDA rule.

In 2000, the Atal Behari Vajpayee-led government had raised cooking gas price by Rs 50.55 per cylinder in March and Rs 35.70 in September before reducing it by Rs 10 in November.

source: TOI