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New Delhi, July 1 The Government today hiked the retail price of petrol by Rs 4 a litre and diesel by Rs 2 a litre.

The first day of the month had surprises in store for fuel consumers as the price hike takes effect from midnight. The Government, however, left the prices of cooking fuels — PDS kerosene and liquefied petroleum gas — untouched.

Announcing the Government decision, the Petroleum Minister, Mr Murli Deora, along with the Petroleum Secretary, Mr R. S. Pandey, hoped people will understand the circumstances which made it necessary to make these adjustments.

Mr Pandey said, “International crude oil prices have risen from $40 a barrel in December 2008 to $70 a barrel today. When prices had declined to $40 a barrel, the Government responded by reducing, in two steps, the price of petrol by Rs 10 a litre and the price of diesel by Rs 4 a litre. In view of the increase in the price of crude oil by 75 per cent, the under-recoveries have reached a level where it has become inevitable to revisit the prices.”

For the current fiscal till June 30, the Indian crude oil basket has risen over 51 per cent. The basket stood at $ 70.29 a barrel on June 30. To cushion the impact of the mounting under-recoveries of the public sector oil marketing companies for selling petroleum products below the market price, the Government decided to pass on some burden to the consumers. The last hike was in June 2008, when the petrol price was raised by Rs 5 a litre and diesel by Rs 3 a litre.

However, when the international crude oil prices dropped, the Government had passed on the benefits to the consumers by reducing the retail prices twice. While remaining silent on the issue of deregulation or giving marketing companies freedom to decide the price, the Petroleum Minster and his Secretary were quick to point out that this is an ‘ad hoc’ increase. In other words, if the crude prices soften, the Government is open to passing on the benefits to the consumers.

By not revising the prices of cooking fuels, the Government will bear a loss of over Rs 30,000 crore this fiscal. On kerosene, the subsidy is Rs 15.26 a litre and on domestic LPG Rs 92.96 a cylinder. “Against the under-recovery of approximately Rs 6 a litre in petrol, the price has been increased by Rs 4/litre. And in the case of diesel against the under-recovery of Rs 3.62 a litre, the price increase has been by Rs 2/litre,” Mr Pandey said.

The total under-recovery on the four petroleum products — petrol, diesel, kerosene and LPG — for the full fiscal is estimated to be Rs 70,000 crore with crude at $70 a barrel. With this price increase, the under-recovery is estimated to come down to about Rs 56,000 crore.

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