Diesel price hike likely to push inflation up.


2 May 2011
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New Delhi: The Government on Friday raised diesel, Kerosene and LPG prices simultaneously. The hike came after a high power panel, headed by Finance Minister Pranab Mukherjee, finally decided to bite the bullet.

Diesel will now cost Rs 3 more - so it's Rs 40.75/litre in Delhi from Delhi Rs 37.75 earlier. In Kolkata it will now cost Rs 43.06/litre, In Mumbai it will be as high as Rs 45.06/litre and in Chennai Rs 43.16/litre.

Kerosene will cost Rs 2 more and in Delhi that's Rs 14.32 per litre, Rs 14.72 in Kolkata, Rs 14.27 in Mumbai and Rs 13.41 in Chennai.

LPG cylinders were increased by Rs 50 rupees. So the cooking gas will now cost Rs 395.35/cylinder in Delhi, Rs 415.10 in Kolkata, Rs 398.45 in Mumbai and Rs 402.40 per litre in Chennai.

The Government however tried to soften the blow by slashing customs duty on crude oil and petroleum products and excise duty on diesel.

"Political problems will always be there, but economic problems do not wait for the solution of political issues," said Petroleum Minister Jaipal Reddy.

But both the UPA's partners and Opposition have scented blood.

"With this kind of increase, there is going to be cascading effect on inflation. The people of this country should understand this Government is no more for aam aadmi," said BJP spokesperson Nirmala Sitaram.

"The Government needs to think on the fuel price hike. Trinamool Congress is totally against it," said Trinamool Congress leader Mamata Banerjee.

The Government, however, says with the crude oil at over $91 per barrel, oil companies have been bleeding. But with inflation at over 9 per cent already, brace up for tougher times ahead.

New Delhi, Jun 25: The Central government increased the the prise of the diesel by Rs 3 per litre, domestic LPG by Rs 50 per cylinder and kerosene by Rs 2 per litre.

In a move to save the bleeding oil companies, government also decided to slash customs and excise duties on crude oil and products, sacrificing Rs 49,000 crores in revenues. The increase in fuel price was decided at a meeting of the Empowered Group of Ministers headed by Finance Minister Pranab Mukherjee.

Central government urged state governments to reduce their VATs (Value Added Tax) to give some relief to the consumers.

Oil Minister S Jaipal Reddy said that the hike was "very modest and minimal". He added that the hike was done to cut down on burgeoning under-recovery of oil marketing companies.

The EGoM also decided to abolish the 5 per cent customs or import duty on crude oil, and slashed the same on diesel and petrol by 2.5 per cent from 7.5 per cent. According to Jaipal Reddy, The reduction in excise duty on diesel would lead to a revenue loss of Rs 23,000 crore this fiscal, while in the customs duty cut the government will forego Rs 26,000 crore.

The price hike, which was effective from the midnight of Friday, Jun 24, would help the oil companies limit their revenue loss by Rs 21,000 crore, but they still would end the fiscal with about Rs 1,20,000 crore of revenue loss.

The decision to increase the price of diesel, kerosene and LPG came just a month after petrol price was hiked by Rs 5 a litre. The price of kerosene was hiked exactly after a year when the government had raised its rates by Rs 3 a litre.

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