Petrol up Rs 4, diesel Rs 2

The government today hiked petrol and diesel prices by Rs 4 and Rs 2 a litre respectively. However, kerosene and cooking gas were spared any increase in prices. The hike in petrol price is the highest in the past few years.

The government has also reduced the customs duty on petrol and diesel to 7.5 per cent from the existing 10 per cent. The move will cost it a revenue loss of Rs 3,300 crore.

In addition, the pricing will move from the import parity model to the trade parity one.

The Union Cabinet, which met today, also decided to issue Rs 28,000 crore of interest-bearing bonds to public sector oil marketing companies.

The government will also consider giving statutory liquidity ratio status to the oil bonds, which will make them readily marketable.

"We have tried our best to keep the burden of crude price hike to a minimum. The price of diesel has been increased by a lesser amount as this fuel is used as an input in many industries and can lead to inflation," Murli Deora, Union petroleum minister, told reporters after the Cabinet meeting.

In a related development, the price of compressed natural gas (CNG) in New Delhi has been increased by Rs 1.20 to Rs 19.20 a kg with effect from the midnight of June 5.

The increase in the price of CNG is on account of a 20 per cent rise in input cost of natural gas, increase in taxes, duties, royalty, and due to an increase in operating expenses, a press release issued by Indraprastha, a joint venture of GAIL (India) Ltd, Bharat Petroleum and the Delhi government, said.

Railway sources indicated that the ministry might not hike freight charges on account of the increase in diesel price. Truckers too said they would not hike freight charges, but might join the protest to be organised by the Left parties against the hike.

On the opposition of the Left parties to the price hike, Deora pointed out that kerosene and domestic cooking gas prices had been left untouched to protect the interests of the common man. He added that he would meet Left leaders to convince them about the compulsion for the hike.

With today's development, the government has accepted two of the Rangarajan Committee recommendations.

The committee had recommended that as only 80 per cent of crude was imported, the oil marketing companies should shift to a trade parity model under which the price of petrol and diesel was the weighted average of import parity and export parity prices in the ratio of 80:20.

The import parity price includes the cost of transportation and insurance charges, while the export parity price only includes the cost of production.

The second recommendation to be implemented is the reduction in customs duty, in line with bringing import tariffs to the Asean level of 5 per cent.

Petroleum Secretary MS Srinivasan added that the government would launch a pilot programme for targeted distribution of kerosene among below poverty line households.

"In the next fortnight, the government will work on preparing this programme to be introduced in one district," he said.

The Rangarajan Committee had recommended limiting the sale of subsidised kerosene to below poverty line households.