In the steepest ever increase, petrol rates were today raised by a massive Rs 7.54 per litre, the first hike in rates in six months.
Petrol price in Delhi has been hiked by Rs 7.54 per litre to Rs 73.18 a litre with effect from midnight tonight, state-owned oil companies said in separate but identical press announcements.
This is the steepest hike in petrol price ever, the previous high being Rs 5 per litre. Oil firms had twice raised rates by Rs 5 per litre - on May 15, 2011 when prices in Delhi were hiked from Rs 58.37 a litre to Rs 63.37 per litre and on May 24, 2008 when rates were raised to Rs 50.56 a litre.
The government had decontrolled petrol price in June 2010 but rates were last increased on November 4 last year. This despite oil price rising by 14.5 per cent and 3.2 per cent fall in value of rupee against the US dollar.
Petrol in Mumbai will cost Rs 78.57 per litre as against Rs 70.66 a litre, at present. In Kolkata, the increase will be Rs 7.85 per litre to Rs 77.88 per litre and Chennai saw rates going up by Rs 7.98 to Rs 77.53 per litre.
Yesterday, Oil Minister S Jaipal Reddy had stated that the depreciation in rupee had necessitated an immediate increase in fuel prices.
But rates of diesel, kerosene and cooking gas have not been revised as a high-power ministerial panel headed by Finance Minister Pranab Mukherjee and having representatives of key UPA allies like TMC and DMK, hasn't met for almost a year now.
Price of diesel, kerosene and cooking gas were last raised in June last year.
"If rupee depreciates by one against the US dollar, our oil companies lose Rs 8,000 crore (annually)," Reddy had said yesterday. "Rupee yesterday dipped (to an all-time low of) Rs 55 (to a US dollar). Last year it was Rs 46. This translates into a loss of Rs 72,000 crore (on account of rupee depreciation) this year."
State-owned oil firms, which had in the fiscal ending March 31, 2012 lost Rs 4,860 crore on petrol sales, were currently losing Rs 6.28 per litre on petrol. After including 20 per cent VAT, the desired increase in petrol price in Delhi came to Rs 7.54 a litre.
The losses on petrol are besides Rs 512 crore per day that oil firms lose on selling diesel, domestic LPG and kerosene. Diesel is currently sold at a loss of Rs 15.35 a litre, kerosene at Rs 32.98 per litre loss and oil firms lose Rs 479 on sale of every 14.2-kg domestic LPG cylinder.
The three firms had together lost Rs 138,541 crore in revenue in 2011-12. This year they are projected to lose a record Rs 193,880 crore.
During 2011-12, petrol prices were revised five times in order to bring domestic prices in line with prices in the international market. Of these, rates were hiked on three occasions and lowered on two other. The last revision in rates on December 1 was a reduction of Rs 0.78 per litre to Rs 65.64 a litre.
"Thereafter, due to domestic market conditions, it has not been possible to change selling price of petrol in line wtih international prices," Indian Oil Corp (IOC), the largest oil retailing firm in the country, said in a statement.
IOC along with Bharat Petroleum and Hindustan Petroleum lost Rs 4,651 crore in revenue since the last revision.
"Given the losses being incurred, the company is compelled to increase the price of petrol by Rs 6.28 per litre (excluding VAT/Sales Tax) with effect from midnight of May 23/24," the statement said.
"This excludes losses already suffered till date during current financial year, i.E., 2012-13, which would require an additional increase of around Rs 1.50 per litre in selling price of petrol for balance part of the year."
With government not allowing oil firms to raise fuel prices due to political considerations, the state-owned companies had demanded that petrol be made a regulated product temporarily and losses on it be made good through cash subsidy support from the exchequer.
Alternatively, excise duty on petrol of Rs 14.78 a litre should be reduced by an amount equivalent to the current loss on the fuel sale. Simultaneously, states should also reduce the rates of Sales Tax, which vary from 15 per cent to 33 per cent (Rs 10.30 to Rs 18.74 per litre).
But with none of this happening, they raised the rates.