Govt bites the bullet, fires fuel & LPG prices

Instead, this evening, the CCEA members were ‘‘near unanimous’’ that petrol prices be raised to global parity through an increase of Rs 2.19 per litre, diesel by Rs 2.12 per litre and a Rs 20-raise in LPG prices with a monthly increase of Rs 5 until the current ‘‘under-recovery’’ of Rs 150 per cylinder was reached.

Kerosene, the poor man’s fuel, was left untouched.

The move comes in the face of the Left’s demand of softening the hike through changes in the duty structure. With little concern for the increase in petrol price, the Left had requested marginal increase in diesel and unchanged LPG and kerosene prices.

The rationale for approving the hefty jumps, say sources, was the members’ concern for the bottomline of state-run oil companies. ‘‘Why should the oil firms lose money on account of increasing global prices?’’ was the general refrain. However, a look at the financials of the oil marketing firms shows that though profits of the these firms did fall in the second quarter of the current fiscal, all the firms — IOC, HPCL and BPCL — have still registered healthy profits. While Q2 profits for IOC were Rs 1,239.53 crore, that of BPCL stood at Rs 321.4 crore while that of HPCL stood at Rs 294.31 crore.

The CCEA did not favour Petroleum Minister Mani Shankar Aiyar’s proposal to abolish the excise and customs duties on kerosene and LPG, a step that could have saved the consumers from a price hike while garnering Rs 1,948 crore for the oil marketing firms between November 2004 and March 2005.

The steep jump, to be effective from midnight on Thursday, also ignores norms announced by Aiyar on July 26. Neither does it adhere to the fortnightly price review at the middle or end of the month nor to the contours of the price band mechanism which sets the rules for government intervention.

Apart from the Left, Lalu Prasad Yadav of the RJD was also opposed to the hike, more so with pending Bihar assembly elections. However, Cabinet Secretary B K Chaturvedi is said to have impressed upon Yadav the need for a hike in prices in the light of the financial compulsions — rather than political ones — for the oil firms.