The biggest oil bailout package announced by the government on Wednesday will force consumers to pay Rs 5 more for each litre of petrol, Rs 3 for diesel and Rs 50 for an LPG cylinder. Public sector oil companies will bear an additional burden of Rs 23,000 crore on their balance sheets despite the government taking a revenue hit of Rs 22,660 crore and issuing Rs 94,601 crore through oil bonds.
The new prices take effect from Wednesday midnight. Petrol and diesel prices were last raised in February when the Indian basket of crude oil was at $67 per barrel. Today, it is ruling close to $123 a barrel, after touching a high of $129 a barrel last month.
Addressing the nation, Prime Minister Manmohan Singh said, ?Taken together, this entire effort will only bridge a tenth of the uncovered gap of over Rs 200,000 crore. There is still a gap of almost 90% which has to be bridged.?
Petroleum minister Murli Deora, however, described the price impact on aam admi as marginal. ?We were left with no choice. Indian Oil, Bharat Petroleum and Hindustan Petroleum would have suffered a revenue loss of Rs 2,45,305 crore this fiscal without these measures. Due to the relentless increase in international oil prices, testing over $135 a barrel levels, it had become necessary for the consumer to shoulder a small part of the increased burden, through a marginal hike in prices,? he said.
Along with the fuel price hike, the UPA government has allowed an across-the-board 5% reduction in customs duty, bringing down the rates on crude to zero and that on petrol and diesel to 2.5% (from 7.5%) and on all other petro-products like jet fuel and naphtha for non-fertiliser use to 5% from 10%. Besides, the excise duty on petrol and diesel has been reduced by Re 1 a litre to Rs 13.45 and Rs 3.60, respectively.
The price hike would give the oil marketing companies an additional revenue of Rs 21,123 crore more.
The duty cuts will make the central exchequer forgo a revenue of Rs 22,660 crore in the remaining 10 months of the fiscal.
Fuel retailers will absorb a revenue loss of Rs 20,000 crore this year on their sales against Rs 16,000 crore during 2007-08.
The subsidy payout by upstream firms like ONGC and OIL will also go up from Rs 26,000 crore in 2007-08 to Rs 45,000 crore this fiscal. Therefore, the total burden to be absorbed by the oil PSUs will be Rs 65,000 crore, an increase of Rs 23,000 crore in 2008-09 as compared to previous year.
While petroleum secretary Srinivasan said the hike in fuel prices would have an inflationary impact of 0.5-0.6% per cent on general prices, economists said inflation is bound to cross a 13-year high of 9% from the current level of 8.1%, as a fallout of Wednesday?s sharp hike in LPG and diesel prices.
On the high level state taxation on petrol and diesel, revenue secretary PV Bhide said there is no move from the finance ministry side on this issue. However, Deora told reporters that the Prime Minister has assured that he will take up the issue with chief ministers shortly.