As Rs falls, petrol prices skyrocket

May 24, 2012, 05:51 IST | Agencies

A steep Rs 6.28 per litre hike, exclusive of taxes, has raised the heckles of country's growing middle class; allies join opposition, slam government

Country’s state-controlled refiners have hiked petrol prices by a steep Rs 6.28 per litre, exclusive of taxes, to compensate losses incurred by them for selling the fuel at subsidised rates. 

The otherwise economically sound move by the government to offset a spiralling import bill at a time when the rupee has depreciated to a record low of Rs 56.19 against the dollar, however, raised the heckles of the country’s growing middle class which has been particularly vocal against the hike, as they are the most affected by higher petrol costs.

“Given the losses being incurred, the company is compelled to increase the price of petrol by Rs 6.28 per litre (excluding VAT/Sales Tax),” the country’s largest oil firm Indian Oil Company said in a statement.

This is the sharpest ever hike in petrol prices. The actual increase in prices will vary from state to state depending on the prevailing sales and other taxes. Given that the rate of Sales Tax/VAT varies from 15 per cent to 33 per cent in the states, additional sales tax of Rs 0.94 to Rs 2.07 per litre will be added to the increased price.

Now, in Mumbai, petrol will now cost Rs 78.16 per litre, while in Kolkata and Chennai, it will cost Rs 77.53 per litre. A sharp drop in the value of rupee has added to the woes of the oil marketing companies, who have been under financial strain due to persistently high prices of crude oil in global markets.

The Indian rupee breached another psychological level of 56 against a dollar yesterday and plunged to a low of 56.18 in the intra-day, hitting a record low for the sixth session in a row. The rupee has weakened by over three per cent in the just three sessions this week despite the assurances and intervention in the currency markets by the Reserve Bank of India.

‘Cholbe na’
Meanwhile, reflecting public anger over the dramatic price hike, UPA ally TMC slammed the move, saying the hike was “a burden on the common man”. Asserting that she and her party were not consulted over this politically fraught decision, Banerjee said the TMC was not pulling out of the government, but warned that this would cause more economic, political instability.

Left, right, centre
The DMK, another key UPA ally, was also disappointed and said it will take up the issue with the government. The chief opposition BJP was unstinting in its denunciation of the price hike and accused the government of burdening the common man through “mismanagement of the economy”. The party demanded a rollback and asserted that it will take its protest against the price hike to the streets.

“It’s atrocious and unbelievable. The UPA government on its third anniversary has given the gift of fuel hike to the people,” said senior BJP leader Prakash Javadekar. While Shahnawaz Hussain warned that the Congress would be taught a lesson in the general elections. The Communist parties, too, slammed the hike. The CPI-M said the economy was in a state of collapse.

Out of hand?
A defensive Congress, however, 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. Finance Minister Pranab Mukherjee also blamed global uncertainties and the rising oil imports bill for the battering of the Indian currency.  

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