Hike in petrol price

Sonia M Ketkar (B.com CA DISA(ICA) Pursuing CS)   (625 Points)

15 September 2011  

Government oil companies on Thursday hiked petrol price by Rs 3.14-3.32 per litre after decline in rupee's exchange value increased the cost of buying crude oil and widened losses from fuel sales.

Petrol price in Delhi has been hiked by Rs 3.14 a litre to Rs 66.84 per litre with effect

from midnight on Thursday, a press statement issued by Indian Oil Corp, the nation's largest fuel retailer, said.

Separately, an Empowered Group of Ministers headed by finance minister Pranab Mukherjee is likely to consider tomorrow limiting supply of subsidised LPG cylinders to 4-6 per household in a year.

Car owners get their fuel tanks filled with petrol.

The move, aimed at cutting the government's fuel subsidy bill by about Rs 20,000 crore, would result in every household being supplied only 4-6 LPG cylinders at subsidised price of Rs 395.35 in Delhi and they will have to pay the market price of Rs 666 per bottle for any requirement beyond that.

Petrol price will vary from city to city due to differential rates of local sales tax. The fuel in Mumbai will cost Rs 3.29 a litre more at Rs 71.28 per litre, while in Chennai the price have been increased by Rs 3.32 to Rs 70.82 per litre.

Current petrol price of Rs 63.70 per litre in Delhi corresponds to crude oil price of about $103 per barrel. But crude today is at $110-111 per barrel. This difference coupled with weakening rupee against the US dollar necessitated the increase in petrol price.

This is the second hike in four months. Oil companies had last hiked petrol price by Rs 5 per litre on May 15.

Vehicles line up to get petrol before the price hike tonight.

Though petrol price were freed in June last year, state oil firms continue to informally consult the government before revising local rates.

"We were losing Rs 2.61 per litre or Rs 15 crore per day on sale of petrol. After adding sales tax or VAT, the hike needed to level domestic rates with international prices came to Rs 3.14 per litre in Delhi," an official said.

IOC, BPCL and HPCL lost Rs 2,450 crore this fiscal on selling petrol below the cost.

Besides petrol, the three firms are losing Rs 263 crore per day on selling diesel, domestic LPG and kerosene below cost. Diesel is being sold at a subsidy of Rs 6.05 a litre, kerosene at Rs 23.25 per litre while domestic LPG rates are under-priced by Rs 267 per 14.2-kg cylinder.

Rupee fell to 48 per dollar on Wednesday for the first time since September 2009.

"Every rupee depreciation, the under-recovery (revenue loss) increases annually by around Rs 9,000 crore," the official said