Prices of petrol and diesel have been increased by around Rs 2.50 and Rs 1.50 a litre, respectively, even as the government announced a 2 per cent reduction in the excise duty on the fuels.
The excise duty was lowered to offset the impact of the over $5 a barrel increase in the international prices of crude since March on domestic oil marketing companies. Duties have been reduced from 32 per cent to 30 per cent in the case of petrol, and from 16 per cent to 14 per cent for diesel.
The government has also decided to compensate these companies for the financial burden incurred during the past two months due to selling petrol and diesel below their cost. The amount has been estimated at Rs 2,000 crore. The finance ministry will issue bonds for the amount.
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The two-pronged strategy involving the price-hike and duty reduction is expected to give a comprehensive relief to the oil marketing companies, which will henceforth revise prices of the two fuels every fortnight, in line with international oil prices.