Thaindian News

New Delhi, Nov 4 (IANS) Criticised over another petrol hike amid high inflation, the government and oil firms Friday defended themselves saying the hike could not be avoided as global crude prices had risen significantly while a depreciating rupee was adding to costs of fuel imports.

Post the hike, petrol now costs Rs.68.64 in the national capital, Rs.73.81 in Mumbai, Rs.72.73 in Chennai and Rs.73.15 in Kolkata.

The government’s explanation came a day after the three state-owned oil marketing companies (OMCs) — Indian Oil Corp (IOC), Bharat Petroleum Corp (BPCL) and Hindustan Petroleum Corp (HPCL ) decided to increase prices of petrol by Rs.1.80 a litre from Friday.

The largest of the three firms, IOC said it had to increase the prices as the government would not have compensated it for any under-recoveries incurred on petrol, as the fuel is now a de-regulated item.

“As petrol is de-regulated, it is up to the OMCs to increase or decrease the prices, as there is no compensation from the government if there are any under-recoveries,” IOC chairman R.S. Butola told reporters at a press conference held here.

Since it is de-regulated, petrol prices can be changed by oil marketing firms as per international prices of crude, but they still require the government’s approval to effect any changes in the prices of diesel, kerosene and cooking gas.

According to Butola, the three OMCs have already suffered under-recoveries of around Rs.2,500 crore in the first six months of the fiscal from selling petrol, compared to last year when the companies had to incur losses of only Rs.2,300 crore.

“The government did not compensate Rs.2,300 crore of last year. “The rupee has dipped from Rs.46.29 to a dollar to Rs.49.40 a dollar, making oil imports costlier and as per the average oil price in the first fortnight of October, we were losing 22 paise a litre on petrol,” Butola said.

On other regulated fuels such as diesel, kerosene and cooking gas, Butola said the companies had combined under-recoveries of around Rs.64,500 crore till September.

“On diesel we have under-recoveries of Rs.41,200 crore, Rs.16,000 crore from kerosene and LPG (cooking gas) at Rs.16,000 crore. We have only been compensated by Rs.36,638 crore out of Rs.64,500 crore,” said Butola.

The hike drew flak from the opposition parties and even the government’s major allies. The Trinamool Congress was the strongest critic with its MPs favouring quitting the UPA government to protest the “repeated unilateral decisions” to raise petrol prices, but party chief Mamata Banerjee kept the decision pending.

The government, however, came out in support of the OMCs.

“Of course, it will have some adverse impact on inflation. But the oil prices are going up and petrol is a decontrolled item,” Finance Minister Pranab Mukherjee told reporters.

In a statement issued Friday, the petroleum ministry said that the average price of Indian basket of crude had risen 30 percent from the last financial year, to $110 a barrel (159 litres) in 2011-12.

“The total under-recovery of oil public sector undertakings for the year is expected to be around Rs.1,32,000 crore compared to Rs.78,190 crore last year. Combined losses of BPCL and HPCL for the first half of this fiscal are more than Rs.12,000 crore and IOC is also likely to be in red,” said the Jaipal Reddy-headed ministry.

–Indo-sian News Service
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