Govt hikes petrol, diesel prices

The government today hiked the price of petrol by Rs 2 per litre and diesel by Re 1 per litre from midnight tonight to curb losses of public sector oil companies.

The decision will benefit domestic oil companies, whose total under-recoveries this year is estimated at around Rs 71,808 crore, by Rs 840 crore.

"We tried our best not to raise fuel prices, but with global crude oil prices touching $100 per barrel in early January, it was impossible for the oil marketing companies to bear the burden of losses," Petroleum Minister Murli Deora said.

The government, however, has decided not to cut taxes on petrol and diesel - a move demanded by the Left parties. In Delhi, taxes make up almost 52% of the cost of petrol and 32% of the cost of diesel.

The Cabinet Committee on Political Affairs today also decided that 57% of the projected annual Rs 71,000 crore retail loss for the oil marketing companies would be borne by the government through issue of oil bonds. This is up from 42.7% the cabinet had cleared in June last year.

"The real benefit from this price hike will be next year. In the 12 months of the next financial year, it will make up around 10% of the total under-recoveries," Petroleum Secretary M S Srinivasan said.