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UPA’s petrol bomb: Rs7.50 hike stuns allies, oppn, 'aam aadmi'

Thursday, 24 May 2012 - 9:14am IST | Place: Mumbai | Agency: dna

Government may slash subsidies on diesel, kerosene, LPG; prices may go up from Friday.

After a gala third anniversary bash, the Congress-led UPA government on Wednesday evening gifted the people of the country a Rs7.50 hike — the steepest to date — in petrol prices.

While opposition parties came down heavily on the UPA, alliance partners of the Congress said burdening the aam aadmi could not be the answer. Mamata Banerjee, West Bengal chief minister and Trinamool chief, slammed the Congress for keeping alliance partners in the dark and taking decisions unilaterally.

“Price rise is being resorted to as an easy option. It has to be seriously looked into…,” Banerjee said in Kolkata. Scoffing at suggestions that the devaluation of the rupee prompted the hike, she said, “I think there is some mismanagement in our country's economic system now....”

For everyone seething in anger, there is more bad news. The government may announce a slash in subsidies on diesel, kerosene and LPG by Friday.

Since the government keeps increasing petrol prices while maintaining near status quo on the prices of other fuels, the difference between petrol and diesel prices has gone up to Rs25 a litre.

So, oil companies want the central government to rationalise the price structure and bring diesel prices — if not at par — at least closer to the price of petrol.

Following the hike, a litre of petrol will now cost Rs78.16 in Mumbai, Rs73.14 in Delhi, Rs77.53 in Kolkata and Rs77.05 in Chennai.

In June 2010, the government decontrolled the price of petrol but the last increase was in November 2011. Coalition compulsions and elections in several states had held back the government from increasing petrol prices till now.

But the continuous fall in the rupee's value, probably, forced the government to go for a hike even if it meant jeopardising the alliance equation. The under-recoveries by the oil companies are expected to reach an all-time high of Rs1.84 lakh crore by the end of this fiscal.

PK Goyal, director (finance), Indian Oil Corporation, said the company was losing Rs13.64 per litre on diesel, Rs479 per cylinder on LPG and Rs31.41 per litre on kerosene. "We have been telling the government to de-regulate fuel prices in the country," he said.

"Looking at the falling rate of the rupee against the dollar, it is necessary that the government takes a bold decision to de-regulate the prices of fuel," said Kirit Parekh, former member of the Planning Commission of India. Parekh also headed the committee on fuel pricing during Murli Deora's tenure as the petroleum minister.

Though UPA allies maintained that the Congress never discussed the fuel price hike with them, the government had been dropping hints for the past couple of days. Pranab Mukherjee, finance minister, had said in Parliament that the government would have to take certain unpopular decisions because of the global economic crisis.

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