New Delhi, May 23: Petrol prices were today raised by nearly Rs 8 per litre, the steepest ever increase that comes in the backdrop of the rupee’s freefall against the US dollar.
A litre of petrol in Bhubaneswar will cost Rs 73.01 from midnight tonight, the hike of Rs 7.50 that left people rush to filling stations late this evening.
Oil marketing firms jacked up the price of petrol by Rs 6.28 a litre. Along with taxes, the hike actually translates to an average of Rs 7.50 per litre across the country.
The raise, coming a day after the budget session ended, is the steepest ever, beating the previous increase of Rs 5 per litre in May last year. In May 2008 as well, petrol price was raised by Rs 5.
The oil firms had last carried out a revision in December 2011 when they rolled back petrol prices by a meagre 81 paise per litre as crude rates came down.
The increase was on the cards with the rupee continuing its slide against the US dollar, but the quantum of the hike has taken everybody by surprise. Oil firms said they had to increase the petrol prices due to the “combined effect of changes in global gasoline prices and the depreciation of rupee”.
“While decline in global gasoline prices has reduced the revenue loss by Rs 6.28 a litre, the depreciation of the rupee has added pressure,” Indian Oil Corporation, the largest oil retailing firm in the country, said in a statement.
A Re 1 fall in the value of the rupee against the dollar means a loss of Rs 8,000 crore for oil marketing firms. The rupee has fallen by Rs 12 against the dollar since last year.
Petroleum minister Jaipal Reddy yesterday said the depreciation of the rupee has translated into a loss of Rs 72,000 crore for oil companies this year.
Since the middle of March, the rupee has fallen more than 10 per cent against the dollar and is now more than 24 per cent lower than a year ago. The global gasoline prices now stand at over $114 a barrel after rising sharply to over $124 a barrel. The gasoline prices were about $109 a barrel in December last year.
The oil companies are supposed to revise the price on the basis of fortnightly average of international gasoline prices, but had not done so for some six months, possibly because elections to several state Assemblies were due earlier this year.
“Due to domestic market conditions, it has not been possible to change selling price of petrol in line with international prices (since December),” the Indian Oil statement said.
The BJP demanded a rollback as the hike would burden the people already hit by inflation. “We condemn the petrol price hike and seek its rollback. We will not allow it to happen. A strong democratic agitation is on the cards,” BJP spokesperson Prakash Javadekar said.
The hike in motor spirit could add mildly to the inflationary pressure on the economy, as its weight on the wholesale price index is a mere 1.09 per cent. Diesel, the preferred fuel for India’s trucker fleet, has a weight of 4.67 per cent and its prices will be decided later at a group of ministers meeting slated for later this month.
D.K. Joshi, chief economist at CRISIL, said: “Petrol does not have much impact on wholesale price-based inflation as it does not have much weight in the index. It is not like diesel, which is a transport fuel. The impact will be muted. But the increase has been very sharp. I think the WPI inflation will be impacted by below 15 basis points.”
State-owned oil firms have lost Rs 4,860 crore on petrol sales since the last revision in December. They were currently losing Rs 6.28 per litre on petrol. After including 20 per cent VAT, the desired increase in petrol price in Delhi came to Rs 7.54 per litre.
The excise duty on petrol is Rs 14.78 per litre. Apart from this, states also impose sales tax/VAT.
