New Delhi, June 15: After a six-month poll freeze, prices of petroleum products erupted today with cooking gas becoming costlier by Rs 20 a cylinder, petrol by Rs 2 and diesel by Re 1 a litre.
Coal price has also been raised, by about 17 per cent.
Kerosene is the only fuel that has been spared. The new petroleum product prices come into effect from midnight.
Petroleum minister Mani Shankar Aiyer told reporters the prices of the petroleum products had to be raised because of the “unprecedented increase in the international prices of crude and petroleum products” which have been ruling at a 15-year high.
He said the entire burden of the increase in international prices had not been passed on to the consumer and would be shared by the oil companies and the government as well.
To soften the blow, the government scaled down excise duties. The duty on cooking gas has been slashed to 8 from 16 per cent earlier, on petrol to 26 from 30 per cent and on diesel to 11 from 14 per cent.
A further reduction in duties “is being considered in the context of the budget” which will be presented on July 8.
The BJP, which had led the previous government that had decided not to revise petroleum prices since January because of the elections, threatened to take to the streets.
Calling the hike “anti-people” and “anti-farmer”, BJP vice-president Mukhtar Abbas Naqvi said: “It is ironic that a hike in fuel and LPG prices is the first major decision of this government, which claims to represent the common man.”
Never happy with a price increase, the Left parties, supporting the government from outside, were remarkably mild. They welcomed the decision to cut duties to cushion the hike and to leave kerosene untouched. But they opposed the increase in cooking gas price with the CPI asking for a rethink.
Aiyer said if the government had gone entirely on the basis of market-determined rates, the price of cooking gas would have to be raised by Rs 133 a cylinder.
Petrol price would then have to be raised by Rs 3.67-4.91 a litre while diesel would have become costlier by Rs 1.67-2.35 a litre. Similarly, kerosene price would have to be raised by Rs 4.43 a litre.
Today’s price increase is expected to boost the turnover of oil companies by around 4 per cent.
The Rs 2 hike in the price of petrol is one of the sharpest in recent memory. The last time such a sharp increase was effected was in June 2002 when the rise was Rs 2.40 a litre.
The cooking gas price hike has been announced earlier than expected as the government seems to be keen to separate the revision from the budget that would then appear to be a more people-friendly exercise.
Aiyer said: “The additional burden on the economy of the substantial rise in international prices is of a rough annualised magnitude of Rs 18,000 crore. Clearly, this is too much of a burden to be passed on to the consumer. As socially responsible corporate entities, the oil companies have agreed to bear their share of the burden imposed by the sharp spurt in oil prices.”
Earlier in the day, Coal India revised prices after a two-year gap by an average of 16.7 per cent. Its chairman S. Kumar said: “Even after this increase, our price of coking coal will be Rs 850 per tonne lower than the landed price of international coal.”