Government hikes fuel price, runs into opposition (Roundup)

June 25th, 2010 - 8:55 pm ICT by IANS  

Pranab Mukherjee New Delhi, June 25 (IANS) The Indian government Friday lifted decades of control on petroleum pricing as it hiked the prices of petrol, diesel, kerosene and cooking gas, inviting a barrage of protests from not only opposition parties but some of its own allies.
The Empowered Group of Ministers (EGoM) headed by Finance Minister Pranab Mukherjee approved a proposal to make the prices of auto fuels market-driven and boost the revenues of oil exploring and marketing companies.

Announcing the decision, Petroleum Secretary S. Sundareshan said the prices of petrol “will be market determined both at the refinery gate and retail level”.

As a result, petrol will now be costlier by Rs 3.50 a litre.

Simultaneously, the government hiked the prices of diesel by Rs.2 a litre, kerosene — known as the poor man’s fuel, and traditionally spared during periodic fuel price hikes — by Rs.3 a litre and cooking gas by Rs.35 per cylinder.

“We are fully aware of the sentiments of the people. We are fully aware of some difficulty it may cause. But in the larger interest of the Indian economy, it is absolutely essential that the consumers also share the burden of rising prices of crude in the international market,” Sundareshan told reporters here.

The government decision ran into opposition from its own allies, including the very vocal Trinamool Congress and the DMK.

The Communist Party of India-Marxist (CPI-M) and its allies accused the government of giving “false arguments to justify these measures” and demanded immediate scrapping of the price increase.

The Marxist-affiliated Centre of Indian Trade Unions (CITU) called for a 24-hour public transport strike in West Bengal Saturday.

The Bharatiya Janata Party (BJP) also demanded a rollback.

“The government has made a mockery of the people’s trust after winning the (Lok Sabha) elections,” BJP spokesperson Prakash Javadekar said.

Petroleum Minister Murli Deora admitted that Trinamool chief and Railway Minister Mamata Banerjee had not attended the EGoM meeting, but added that the other allies including the DMK were part of the decision.

However, DMK’s Chemicals and Fertilizers Minister M.K. Alagiri later said the decision would put an additional burden on the public.

The move is likely to stoke inflation, which is already high, and further push up prices of essential commodities like vegetables and foodgrain.

The finance ministry’s chief economic adviser, Kaushik Basu, admitted that there was likely to be an impact on the wholesale price index inflation, which was 10.16 percent in May.

“The (decontrol of petrol prices), coupled with price increase for LPG (cooking gas) and kerosene, will have an immediate positive impact on inflation. I expect an increase of 0.9 percentage points in the monthly Wholesale Price Index (WPI) inflation,” he said in a statement.

However, he added that since the hike in fuel prices would push down fiscal and revenue deficit, “they will exert a downward pressure on prices”.

Sundareshan said that even after the changes, the under recoveries will still be around Rs.53,000 crore at the current international price of crude, which stands at $75 a barrel.

“Government and upstream companies will have to find the funds to compensate the oil marketing companies,” he said.

Mamata Banerjee said she was unhappy with the government decision but added that her party would not topple the Congress-led United Progressive Alliance (UPA) government.

“My party does not support this hike. This puts pressure on the people. The government should reconsider the decision,” she said.

There was anger on the street too.

“These steps will break the back of the middle class. We are doomed,” cried 31-year-old Pulkit Sharma.

The Congress vociferously backed the government move.

“We believe the government must have been constrained to take these steps and ensure that the impact is minimal as much as possible,” spokesperson Jayanthi Natarajan said.

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