By IANS
New Delhi : India’s cabinet Thursday gave its approval to a hike of Rs.2 (5 cents) a litre on gasoline and Rs.1 a litre on diesel to ease the fiscal burden on oil firms, even as Left parties called for nationwide protests against the move.
Officials in the petroleum ministry said the cabinet also approved a hike in the bonds issued to oil marketing companies to offset their losses to 57 percent of their total under-recoveries (sale below cost price) from 42.7 percent now.
After much debate at the political level, including discussions by an empowered group of ministers, the Cabinet Committee on Political Affairs, which met here under Prime Minister Manmohan Singh, finally approved the hike.
“The price changes are effective midnight,” Petroleum Minister Murli Deora told reporters here after the meeting. He had maintained that without the price hike petroleum companies would have lost $18 billion this fiscal.
“It was becoming impossible for oil companies to bear this huge burden of under-recoveries,” Deora said, adding that the losses would have been $22.5 billion, but for the rupee appreciation and higher refining margins of oil companies.
He said the losses amounted to Rs.560 billion ($14 billion) in the last fiscal.
Normal unleaded petrol currently retails at Rs.43.52 rupees a litre and diesel at Rs.30.48 litre in the national capital. The prices vary across the country, depending on the level of sales tax imposed by various states.
The last hike in transport fuel prices was in June 2006, when crude oil prices were at around $65 per barrel, after which it ballooned to $100 a barrel, resulting in oil companies accumulating huge losses.
India imports over 70 percent of its crude oil and the successive increases in international prices have hit oil-marketing firms hard. Against a demand for 130 million tonnes of crude, the country imports 102 million tonnes, officials said.
“It a sensible decision. It will reduce under-recoveries of oil-marketing firms to some extent,” said Venugopal N. Dhoot, president of the Associated Chamber of Commerce and Industry (Assocham).
“But the issuance of oil bonds is not a viable solution. It enhances the fiscal liabilities of the government towards common public.” He said, adding it also shifts the burden to future generations.
Last month, the government had approved bonds worth $2.87 billion to help state-owned oil marketing companies to reduce their losses in the current fiscal due to their inability to sell fuel at market prices.
This was in addition to bonds worth $5.97 billion announced earlier for the same purpose to the three state-run oil-marketing firms, Indian Oil Corp, Hindustan Petroleum and Bharat Petroleum.
The news of price hike resulted in the share prices of all oil firms ending on a positive note in the bourses, with the sub-index for the sector ending higher by 7.42 percent on the Bombay Stock Exchange.
But the Left parties, which prop the Manmohan Singh government from outside, did not take kindly to Thursday’s decision and said it would further burden the average citizen, already reeling under inflation.
“The government has miserably failed. The government has not listened to us. We are calling our party members to immediately go on protest across the country,” Communist Party of India general secretary D. Raja said.