Just a day after Prime Minister Manmohan Singh warned of taking "difficult decisions" to mobilise revenue, state-controlled refiners hiked the fuel price by Rs.6.28 a litre exclusive of taxes effective midnight Wednesday.
This, an official said, was meant to compensate losses incurred by the companies for selling petrol at subsidised rates.
The hike will range between Rs.7.54 and Rs.7.98 in the four metros and would be higher or lower in other cities depending on the extent of taxes.
India Inc said the increase had become inevitable with the continued slide of the rupee's exchange rate.
"The inflationary impact of such an increase is ... transitory. It can be mitigated by reduction in taxes by the central and state governments," the Federation of Indian Chambers of Commerce and Industry said.
Indian Oil Corporation said given the losses being incurred, it was forced to hike the price of petrol.
"This excludes losses already suffered till date during current financial year 2012-13, which would require an additional increase of around Rs.1.50 a litre in selling price of motor spirit for balance part of the year," it said.
Petrol in Delhi will cost Rs.73.18 a litre, in Mumbai Rs.78.57, in Kolkata Rs.77.88 and in Chennai Rs.77.53 a litre.
A defensive Congress took refuge in the high global prices of oil. "Global prices are up and the oil companies take their own decisions after the deregulation of petrol prices. India is part of the world and so it is affected too," said Congress spokesperson Rashid Alvi.
The middle class reacted with predictable anger. The opposition tore through the official justification of the price rise while allies DMK and Trinamool Congress too flayed the Congress-led government.
But even as she attacked the Congress for not consulting the allies over the issue and expressed her opposition to the price rise, Trinamool leader and West Bengal Chief Minister Mamata Banerjee refused to quit the UPA.
Both DMK chief M. Karunanidhi and Punjab Chief Minister Parkash Singh Badal demanded an immediate rollback, saying the hike would badly hurt the common man.
The CPI-M and other Left parties were the most critical.
D. Raja of the Communist Party of India said: "It is just a prelude. It will burden the common people and we will protest on the streets and the government will have to rollback the hike."
Corporate Affairs Minister M. Veerappa Moily justified the decision, pointing out at the fiscal deficit and an economic situation "going out of hand". He said the price rise was "most minimal".
The Bharatiya Janata Party blamed fiscal mismanagement for the decision. Tamil Nadu Chief Minister J. Jayalalitha mockingly called it a "gift" from the UPA-II government on its third anniversary.
Indian states levy sales tax of 15-33 percent. Among the other levies are VAT and additional sales tax.
India deregulated petrol prices in June 2010 but continues to subsidise kerosene, diesel and cooking gas to protect the poor from inflationary pressures.
Petrol prices were last revised Nov 4, 2011. The oil companies have been losing Rs.8,000 crore per annum as they were being forced to sell petrol at subsidised rates.
Petroleum and Natural Gas Minister S. Jaipal Reddy had said Tuesday the depreciation of the rupee had necessitated an immediate increase in fuel prices.
Following are the revised prices of petrol in the four metros after the steepest-ever hike in rates.
City Current Price Revised Price Increase
Delhi 65.64 73.18 7.54
Kolkata 70.03 77.88 7.85
Mumbai 70.66 78.57 7.91
Chennai 69.55 77.53 7.98
(All rates in Rs/litre)