New Delhi, June 20: The Centre has bitten the bullet a day after the Calcutta civic elections, hiking the prices of petrol and diesel by Rs 2.50 and Rs 2 a litre despite Left pressure.
But the impact on the ground will be more because of local taxes ' in Calcutta, the price of petrol will go up by Rs 2.90 to Rs 43.79 a litre. Diesel will cost Rs 30.80 a litre.
Although the hike, which comes after several rounds of talks with the Left, has sparked protests, it is lower than the corresponding rise in global prices. A matching increase warrants a raise of Rs 4.68 a litre in the price of petrol and Rs 5.13 a litre of diesel.
Prime Minister Manmohan Singh is believed to have intimated the Left about this during talks with them. But it has remained adamant, insisting a slash in duties would make for a smaller hike.
The Left parties, which was under the impression that the hike would be in the range of Rs 1.50-Rs 2 a litre, have announced a nation-wide strike on June 28. But it is being seen as a token protest and the Left is not expected to do anything drastic.
CPI leader D. Raja said: “The hike would have a cascading effect on general prices, which would adversely affect the common man and the economy.”
Analysts said the Centre had intentionally put off the hike till the Calcutta civic elections to avoid embarrassing its Left partners. Cabinet spokesman and I&B minister S. Jaipal Reddy said: “The decision was taken after consultations with everyone.”
Announcing the increase, petroleum minister Mani Shankar Aiyar said only half the rise in global prices had been passed on to consumers. Public sector oil companies would continue to bear 50 per cent of the burden, he said. “We have basically gone back to the principle of equitable burden sharing between the government, the consumers and oil companies.”
Aiyar said the government’s revenues had taken a big hit when duties on LPG and kerosene were cut in the budget. Oil companies were absorbing a loss of over Rs 11 a litre on kerosene and over Rs 130 on a cylinder of LPG, he said.
The idea behind today’s hike was that “our oil sector companies should not suffer cash losses. Their profits must be such as to service their equity obligations and profits must be adequate to meet investment requirements”.
The minister said “this is a one-time hike and we may consider reverting to the mechanism of fixing prices every fortnight after international oil prices stabilise”.
The BJP demanded a rollback, claiming petrol prices had gone up by Rs 10.50 a litre in a year and diesel by Rs 7.25 a litre.
Congress spokesman Anand Sharma said: “We ourselves are anguished. The government has been mindful of the consumer and weaker sections as it has not raised the LPG and kerosene prices.”