New Delhi, Sept. 6: The government today raised the price of petrol by Rs 3 and diesel by Rs 2 a litre.
Prices of cooking gas and kerosene were left untouched as railway minister Laloo Prasad Yadav refused to agree with the Bihar Assembly polls round the corner.
The new prices come into effect from midnight.
Petroleum minister Mani Shankar Aiyar said after a cabinet meeting that only 13 per cent of the increase in international prices has been passed on to consumers.
Oil companies will bear 52 per cent of the burden and the government 33 per cent by way of subsidy on cooking gas and kerosene.
Today’s increase in petrol and diesel prices is expected to fetch oil marketing companies an additional revenue of Rs 5,000 crore for the rest of the financial year.
Petroleum secretary S.C. Tripathi said that on the basis of international trends, the package of burden sharing which has been evolved should be able to see the country through for the rest of the financial year without another round of price increase.
Prime Minister Manmohan Singh had told the Left leadership yesterday that the prices of gas and kerosene would also have to be raised as international crude prices had shot up to $70 per barrel and there was no scope for reducing excise duty as tax collections were low.
However, at the cabinet meeting, Laloo Prasad is reported to have put his foot down and refused to let the government touch gas and kerosene prices for fear of an adverse impact on his party’s poll prospects.
The Prime Minister was forced to relent and asked the finance ministry to issue government bonds as compensation to oil companies to make up for the losses on gas and kerosene sales.
Earlier, the finance ministry had refused to consider bonds, arguing that it would simply add to the government’s debt and instead recommended increasing prices of gas and kerosene.
Public sector oil companies expect to lose Rs 15,000 crore on gas and kerosene sales during the rest of the financial year and the government bonds cleared today are aimed at covering a major part of this.
Tripathi said: “We expect the value of the bonds to be issued to the oil companies to range between Rs 10,000 crore and Rs 15,000 crore.”
These bonds will in effect be IOU notes from the government that oil companies can encash with banks or financial institutions even before maturity, though at a discount.