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Wednesday, May 23, 2012

Petrol price up 7.92 to 78.58, sharpest hike ever

UPA Allies Call It Unilateral, Ask For A Rollback

NewDelhi:By the time you read this, the price of petrol would have gone up by more than Rs 7.50 a litre across the country. The increase, the steepest-ever, came a day after Parliament's Budget session ended and PM Manmohan Singh talked about the need for "difficult decisions". 
    After adding state taxes, petrol will cost Rs 73.18 a litre in Delhi, Rs 78.58 in Mumbai, Rs 77.88 in Kolkata and Rs 77.53 a litre in Chennai. This marks an increase of around 10% and puts a squeeze of roughly Rs 6,000 a year on a family that spends an average of Rs 5,000 per month on petrol. 
    This is the first upward revision in petrol price since November 4, 2011. The highest increase till now had been Rs 5 per litre. State-run oil marketers twice raised prices by this amount—on May 15, 2011 and May 24, 2008 when the petrol price crossed the Rs 50 a litre mark for the first time. 
    The decision immediately drew 
howls of protest and demands for rollback from parties across the political spectrum, including UPA allies such as Trinamool Congress chief Mamata Banerjee. But the West Bengal chief minister also made it clear that she would not rock the UPA boat. 
    Consumers too voiced their anguish even as they thronged petrol pumps for a "cheaper" tank-up one last time. Police had to be called in to control the spiraling queues in many pumps in Delhi and elsewhere. 
    The announcement of price revision came while oil minister S Jaipal Reddy is away in Turkmenistan to attend a ceremony for signing a fournation gas pipeline deal. 
    Finance minister Pranab Mukherjee laid the onus of the hike on oil marketers. "The decision has been taken. Petrol is a deregulated commodity," he said. 
Congress gambles with middle-class patience... 
    The government seems to be testing the patience of the middle class. But the timing of the shocker of a raise, after seven-and-a-half months, seems political. The next political challenge, elections in BJP-ruled Gujarat and Himachal, are in November and the Congress is hoping the angst will die down by then or better still, the middle class will come to terms with the 'new normal' in petrol prices. P 12 
...But will take credit for 
    1.50 cut expected soon 
    Consumers can look forward to a cut of more than Re 1 in petrol prices by the end of this month, given the trend in the Singapore bulk market. Indeed, government sources said the reduction was already factored in by the state oil firms. "Unless there's a dramatic fall in the rupee's value against the dollar, a reduction of 1 or 1.50 per litre is quite certain. After taxes, it would be around 2 a litre," a source said. P 12 
Re slides to 56.01/$, hits markets, foreign travel 
The rupee continued its free fall against the US dollar, plunging to a new record low of 56.23 on Wednesday. It closed at 56.01. The rupee's weakness now threatens to push India out of the trillion-dollar market capitalization club. The sensex fell 78 points, to end below 16,000. Meanwhile, Indians travelling abroad are spending less since costs, in rupees, have jumped 15-20% in a month. P 19 Do or die measure, contend oil firms 
New Delhi: The government had freed petrol prices in June 2010 when crude came down to around $40 a barrel from a historic high of $147 per barrel in July 2008. But in practice, oil companies do not move without a signal from the parent oil ministry which officially continues to deny any control. 
    Sources said the increase was stage-managed. Oil companies usually review prices on the fifteenth and last day of each month. But Wednesday's increase was announced midweek to take advantage of Reddy's absence after the Parliament session. 
    Reddy reportedly gave his go-ahead for raising petrol prices before leaving for Turkmenistan. His absence gave an opportunity for the government to distance itself from the rise and reinforce the impression that it did not control its price as it was a deregulated fuel. But oil companies described the hike as a "do-or-die" measure. R S Butola, chairman of market leader Indian Oil Corporation, argued that the price had to be increased steeply since they had not revised it for the last seven months even though global prices of crude went up 3.5% and petrol in bulk markets rose 14.5%, even as the rupee continued its slide against the dollar. 
    "All three retailers together piled up a loss of Rs 2,321 crore between the last price hike in November and March 31. Since March alone, we have taken a hit of Rs 2,330 crore. The rupee too has fallen some 3-4%. The government would not have compensated these losses as petrol is a deregulated product," he said. 
    The IOC chairman refused to comment when asked whether he had secured the ministry's nod earlier to raise petrol prices. "We had told the government either it takes back control over petrol or we would have no option but to raise the price steeply. We did what we had to do. There was no choice left for us," he said.


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