Petrol, diesel, cooking gas dearer in India (Intro Roundup)June 5th, 2008 - 12:14 am ICT by IANS
New Delhi, June 4 (IANS) Despite political opposition and the average citizen’s anger, India Wednesday allowed a 9.5-11 percent increase in prices of cooking and transport fuels but cut customs and excise duties on crude and petroleum products to ease the financial burden on state-run oil firms, reeling under high global oil prices. This has been the highest hike allowed so far in fuel prices in the country, but defended by Prime Minister Manmohan Singh himself. Both the opposition Bharatiya Janata Party (BJP) and the Left parties that prop the ruling United Progressive Alliance (UPA) coalition, nevertheless, criticized the move.
The decision, taken at a marathon meeting of the Cabinet Committee on Political Affairs presided over by Manmohan Singh, would result in petrol becoming dearer by Rs.5 per litre, diesel by Rs.3 and cooking gas by Rs.50 per cylinder.
The hikes take effect midnight Wednesday.
“It must be appreciated that what has been done is the bare minimum,” the prime minister said in a 20-minute televised address to the nation, just hours after the decision.
“There were no other options before the government. We were helpless. So the decision was taken to revise the prices,” Petroleum Minister Murli Deora told reporters earlier, soon after the two-hour cabinet meeting at the prime minister’s official residence at 7, Race Course Road here.
Deora also requested state governments to chip in to reduce the burden on the average citizen by lowering the sales tax on petroleum products, which is as high as 30 percent in some states.
Normal unleaded petrol is now expected to cost Rs.50.56 a litre in the national capital and Rs.55.88 in Mumbai, while diesel is expected to retail at Rs.34.80 and Rs.39.54, respectively, in the two metros.
Similarly, cooking gas is set to cost Rs.344.75 for a 14.2 kg cylinder in the national capital and Rs.348.00 in Mumbai, as per the revised prices announced by Indian Oil Corp.
The cabinet meeting also decided to bring down customs duties on crude oil to nil from five percent earlier, and on diesel and petrol to 2.5 percent from 7.5 percent. Excise duty has also been cut by Re.1 per litre on the two products.
Finance ministry officials told reporters later that the reduction in various levies will cost the exchequer Rs.226 billion during the remaining 10 months of the current fiscal.
They also said three state-run oil retailing firms - Indian Oil Corp, Hindustan Petroleum and Bharat Petroleum - would receive Rs.946 billion ($22 billion) as bonds to ease the fiscal burden for selling petroleum products below cost.
The decisions resulted in shares of these state firms rising some four percent.
Prices of petrol and diesel were last raised in India in February after close to 20 months. At that time crude oil prices were ruling at $67 per barrel, against $125 now. India imports a little over 70 percent of its crude oil needs.
Wednesday’s meeting was attended by Deora, External Affairs Minister Pranab Mukherjee, Defence Minister A.K. Antony, Finance Minister P. Chidambaram, Railway Minister Lalu Prasad and Transport Minister T.R. Baalu, among others.
Soon after the cabinet’s decision was communicated to the nation, opposition parties deplored the price hike and said it would be suicidal for the ruling coalition that has entered an election year.
The decision also evoked some protests, notably in Andhra Pradesh where activists of the state’s main opposition Telugu Desam Party and the Left parties took to streets in the state capital Hyderabad to protest the hike.
“This isn’t a marginal hike. It’s a substantial hike. It will have a deleterious effect. It will fuel inflation. So the Left parties will have a week-long protest from Thursday,” Communist Party of India-Marxist leader Prakash Karat said.
India’s annual rate of inflation has topped the worrisome eight-percent mark and stood at 8.1 percent for the week ended May 17.
“This is an economic terror unleashed on the country. The prime minister has put another burden on the people. This will cause an upheaval in the nation. It is a black day for the country,” BJP spokesperson Rajiv Pratap Rudy said.
Also on expected lines was the reaction from the average citizen who felt that the hike would result in prices of other commodities going up as well, mainly essential items of daily consumption.
“I have to now juggle my entire monthly budget. The hike is too much to handle, especially for a middle-class housewife. I have to cut down on purchases,” said Minu Agarwal, a homemaker in the national capital.
Ever since prices of global crude oil prices started going up - and even topped $135 per barrel at one point - the government has been contemplating how to ease the burden on state-run fuel retailers, who need the cabinet’s green signal to to revise prices.
A series of meetings followed both within the government and outside since the ruling coalition was wary of the political fallout of hiking fuel prices, having entered an election year.
The electoral setbacks to the Congress party in some states like Karnataka and balloting due in some others in coming months made the task even more difficult.
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