Petrol dearer by Rs 2.50, diesel by Rs 2

Hike likely to reduce losses of oil PSUs in April-June by Rs 300cr.

The government hiked petrol and diesel prices by Rs 2.50 to Rs 40.49 a litre and Rs 2 a litre to Rs 28.45, respectively.

The oil companies have been allowed to effect the increase from midnight after a gap of more than seven months during which the Indian basket of crude oil breached $52.83 mark.

With only nine days left to the first quarter, oil companies said the hike would have little impact on their first quarter losses unless the government revises the burden-sharing mechanism.

The hike was likely to bring down the revenue loss of the state-owned oil marketing firms in April-June by only Rs 300 crore from an estimated Rs 10,000 crore due to the sale of LPG, kerosene, petrol and diesel.

The oil companies were still incurring a loss of about Rs 3 on sale of diesel and Rs 2.20 on petrol.

Loss on sale of LPG was around Rs 109 a cylinder and Rs 11 a litre for kerosene.

Addressing reporters after a meeting of the Cabinet Committee on Economic Affairs, petroleum minister Mani Shankar Aiyar said, "This is a one-time increase and the government would revert to price-band system only when the international oil prices stabilise."

The price increase in both petrol and diesel is conservative compared to the increases in the international markets, he said.

On Friday, US light crude for July delivery rose $1.89 to settle at a new closing high of $58.47 a barrel on the New York Mercantile Exchange.

It had risen to an all-time trading high of $58.60 per barrel during the session. The Indian basket of crude was hovering around $50 a barrel

"Oil public sector units have already taken a substantial hit due to certain revisions made with respect to custom and excise duties. Even though the finance minister has said the changes were revenue neutral, the impact varies across various individual petroleum products," said Aiyar.

The consumers have been spared from a hike since November and the items of mass consumption like LPG and kerosene have been exempted from any increase in prices, he said.

He said the government is yet to decide on the burden-sharing among the various stakeholders. The formula for sharing would be arrived upon after consultations with all interested parties.