A weak rupee ups petrol price

Rs 3.14-3.22 hike is second highest in four months; LPG cylinder cut likely

The latest hike, which came into effect from midnight, is the second highest after a Rs 5 increase in petrol since May 15. This is the tenth hike in petrol prices since June 2010. There is, however, no hike in the prices of diesel, LPG or kerosene, at least as of now.

In addition to petrol, the prices of aviation turbine fuel or jet fuel has been hiked – by 2.5 per cent. It will not be a surprise if the airlines decide to pass on the hike to the passengers in the near future. Also, the petrol price hike announcement came a day after inflation climbed to a 13-month high of 9.78 per cent.

There will likely be more restrictions on fuel consumers. On Friday, an Empowered Group of Ministers (EGoM) headed by Finance Minister Pranab Mukherjee is likely to consider limiting the supply of subsidised LPG cylinders to four to six per household in a year.

Referring to the petrol price hike, an official explained that petrol price will vary from city to city due to differential rates of local sales tax. Petrol in Delhi will cost Rs 66.84 a litre. In Mumbai, it will cost Rs 3.29 a litre more at Rs 71.28 per litre, while in Chennai the price has been increased by Rs 3.32 to Rs 70.82 per litre.

Though petrol price was freed in June last year, state oil firms continue to informally consult the government before revising local rates.

“We were losing Rs 2.61 per litre or Rs 15 crore per day on sale of petrol. After adding sales tax or VAT, the hike needed to level domestic rates with international prices came to Rs 3.14 per litre in Delhi,” an official said.

IOC, BPCL and HPCL lost Rs 2,450 crore this fiscal on selling petrol below the cost. Besides petrol, the three firms are losing Rs 263 crore per day on selling diesel, domestic LPG and kerosene below cost. Diesel is being sold at a subsidy of Rs 6.05 a litre, kerosene at Rs 23.25 per litre while domestic LPG rates are under-priced by Rs 267 per 14.2-kg cylinder.

The rupee fell to 48 per dollar on Wednesday for the first time since September 2009.

“Every rupee depreciation, the under-recovery (revenue loss) increases annually by around Rs 9,000 crore," the official said. The current petrol price of Rs 63.70 per litre in Delhi corresponds to crude oil price of about $103 per barrel. But crude today is at $110-111 per barrel. This difference coupled with a weakening rupee against the dollar necessitated the increase in petrol price.

The Friday meeting of the EGoM, with a view to limit the government's fuel subsidy bill, is likely to consider giving every household only four to six LPG cylinders. In Delhi, while the consumer gets a cylinder at the subsidised price of Rs 395.35, they will be asked to pay market price of Rs 666 per bottle for any requirement beyond that.

Limiting the supply of subsidised LPG cylinder is likely to save the government about Rs 20,000 crore in subsidy outgo annually. The limited supply of subsidised LPG would be for those who own a car, two-wheeler, house or figure in the income-tax list, an official said.
Each 14.2-kg cylinder of LPG normally lasts a household 45-60 days and based on this calculation a maximum of six cylinders are considered enough to see a family through the year.

At present, records of LPG distributors of public sector companies shows that a vast number of households are taking as many as 20 to 30 cylinders per household each year.