Petrol prices to rise by up to Rs 2.67 a litre

Petrol and diesel prices will go up by Rs 2.67 a litre and Rs 2.58 per litre, respectively, after Finance Minister Pranab Mukherjee on Friday raised customs and excise duties on the two, virtually putting the Kirit Parikh Committee report on fuel price in cold storage.

Customs duty on petrol and diesel were hiked to 7.5 per cent from 2.5 per cent while excise duty was raised by Re.1 a litre to Rs 14.35 and Rs 4.60 per litre on non-branded (normal) petrol and diesel respectively.

The incidence of customs and excise duty would result in petrol prices going up by Rs 2.67 a litre in Delhi and diesel by Rs 2.58 per litre with effect from midnight tonight.

Petrol, in Delhi currently costs Rs 44.72 a litre and diesel Rs 32.92 per litre.

Mr. Mukherjee also imposed 5 per cent import duty on crude (currently nil), a move that would impact refiners like Reliance Industries and Essar Oil with their input cost going up.

Reliance Industries’ 33 million tons a year refinery catering to domestic market would alone have to bear Rs 5,100 crore because of higher rates. Its other 29 million tons unit is only for exports and does not pay customs duty.

The rates hike virtually put the Parikh report on fuel pricing reforms in cold storage as implementing the expert group report on freeing petrol and diesel prices would mean a further Rs 4.94 a litre increase in petrol and Rs 3.20 per litre hike in diesel rates.

Deregulate fuel, hike LPG price: Pane

A committee of experts headed by the former Planning Commission member, Mr Kirit Parikh, on Wednesday recommended deregulation of petrol and diesel prices. It also recommended that the domestic price of LPG be hiked by Rs 100 and kerosene by Rs 6 per litre.

At current international crude oil prices, deregulation of auto fuels will result in a Rs 4.72-per-litre increase in the price of petrol and a Rs 2.33-per-litre increase for diesel.

But given the current political realities, the government is unlikely to accept the recommendations of the committee in their entirety. The government is already under attack from the Opposition over high food prices. Any hike in fuel prices at this time will have a backlash. A diesel price hike would result in a further increase in food prices and other products as the cost of transportation will rise.

“We will present a view before the Cabinet in a week. It will be the Cabinet which will take a final decision,” said the petroleum minister, Mr Murli Deora.

The petroleum secretary, Mr S. Sundareshan, said the ministry has been directed by the PM to immediately process the report. But when asked whether the government would implement the recommendations immediately, the secretary was quick to add that there is a “definite difference between processing and implementation”.

Two earlier committees had recommended deregulation of fuel but nothing happened due to political opposition. A committee headed by the present chairman of the PM’s Economic Advisory Council, Dr C. Rangarajan, had in 2006 advised linking prices of petroleum products to cost of crude oil. In 2008, a committee headed by the Planning Commission member, Mr B.K. Chaturvedi had made a similar recommendation.

Asked about this, Mr Deora said: “I hope history doesn’t repeat itself.”