New Delhi, Sept. 24: Consumers will have to brace for another possible petrol price hike within a fortnight as crude prices continue to harden on the world markets.
“However, we are trying to keep it down to the bare minium. We are pressing the finance ministry to accept a duty cut proposal which could neutralise the oil price hike to a large extent,” top petroleum ministry officials said.
They added that the finance ministry had not yet responded but had indicated in informal talks that they were willing to agree to a duty cut move which would keep revenue earnings from taxing crude constant.
Petrol prices would come up for review by the end of this month, but duty reductions could take more time.
If and when they come, “it could mean a duty cut of about Rs 1 or so a litre,” officials said. News of impending US-backed invasion of Iraq, has already driven global crude prices to over $ 31 a barrel compared with an average price of just over $ 27 last month.
For every $ 1 rise in crude prices, rise in retail price, unless absorbed by subsidy or changes in tax rate, works out to 64 paise a litre for petrol and 58 paise a litre for diesel.
Last week, public sector petroleum companies had announced an increase in the retail prices of petrol and diesel. While petrol prices were raised by up to 50 paise per litre, diesel prices went up by about 40 paise.
Even after the last round of price hikes, domestic petrol price was nearly Rs 1 short of per litre import parity price, while diesel’s current domestic price is 67 paise short of import parity.
Oil companies have done so because of pressure from the petroleum ministry which has been indirectly pressuring them to absorb some notional losses till the finance ministry takes a decision on duty rates in October. The ministry even wants the PSU oil firms to even permanently absorb some notional losses so that prices do not rise beyond a certain point.
The government’s logic is that a steep oil price hike would see inflation going up causing hardship to the people. Besides, the official logic, the BJP government is also scared that a steep increase in prices of essential commodities would earn it a bad name at a time when several state assemblies are slated to go to the polls.
Meanwhile, a study released here said truck hire rates are likely to go up by as much as 8-12 per cent due to a a series of diesel price hikes since June this year.