Thaindian News

Kolkata, Nov 5 (IANS) Defending the government on the recent petrol price hike, Finance Minister Pranab Mukherjee Saturday said the decision on the increase was taken by oil firms, as the fuel was a de-regulated item.

“This is the decision in their (oil marketing companies) domain. They have done (increased prices) several times before. But, I do not want to get into the merits of it,” Mukherjee told reporters here on the sidelines of an event.

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

“On June 28, 2010, it was decided that out of four important petroleum products petrol will be de-controlled — that means the oil marketing companies will determine the prices of petrol,” Mukherjee said.

According to Mukherjee, the OMCs had give adequate reasons for the hike, such as high global crude prices and a depreciating value of the rupee.

“Oil marketing companies gave adequate reasons. They had to do it because they import crude petroleum products for us,” Mukherjee said.

“If the oil companies are in the red, will they be able to raise resources from the market? Would they be in a position to import crude oil,” he asked.

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

After 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.

On 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 on petrol.

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

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

“The government did not compensate Rs.2,300 crore (losses) of last year. The rupee 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.