Petrol | Diesel | Home LPG prices Up - Economic Updates

The government hiked petrol and diesel prices by Rs 5 and Rs 3 a litre respectively and that of LPG by Rs 50 a cylinder, while sparing poor man's fuel kerosene from any increase. The hike will be effective from midnight. The price of petrol, currently Rs 45.5 a litre in Delhi, will now cost Rs 50.5 or 11 per cent more, while diesel, which retails at Rs 31.5, will now cost 34.5 or 9.5 per cent more.

The Cabinet also reduced the customs duty on crude oil from 5 per cent to nil, and on petroleum and diesel from 7.5 per cent to 2.5 per cent. The customs duty on other petroleum products has been reduced from 10 per cent to 5 per cent. Inflation following the fuel price hike may rise by 0.5-0.6%.

Customs duty on other petroleum products like ATF and Naphtha has been cut from 10 per cent to 5 per cent.

The Union Cabinet chaired by Prime Minister Manmohan Singh took a slew of measures to offset the surging global oil prices that had put the national oil companies under acute pressure. The increase in prices would be effective from midnight, Petroleum Minister Murli Deora said.

The price hike would help oil companies to earn Rs 21,123 crore more.

As part of measures, the government decided to take a burden of Rs 94,601 crore for which it will issue oil bonds to state-run BPCL, HPCL and IOC which were reporting a daily loss of over Rs 720 crore.

also read : Impact of increase in fuel prices on inflation

In addition, the oil producing PSUs like ONGC would shell out Rs 60,000 crore through discounts to state-owned oil refiners and marketing companies.

Despite all the measures, there would still be a gap of Rs 29,000 crore, Revenue Secretary P V Bhide told reporters briefing about the decisions taken at the Cabinet.

When asked whether states will also be told to cap sales tax on petrol and diesel, the Revenue Secretary said there is no move from the Finance Ministry side on this issue.

However, sources said the Prime Minister's address to the nation later in the day may carry appeal to states in this respect.

With the hikes, India joins other Asian nations like Indonesia and Malaysia that are raising regulated domestic fuel prices as they find they can no longer afford to shield their consumers from the full effect of record global prices.

Petrol and diesel prices were last raised in February when the Indian basket of crude oil was at 67 dollars per barrel. Today it is at 124 dollars per barrel.

State-run Indian Oil, Bharat Petroleum and Hindustan Petroleum were together projected to lose Rs 2,46,600 crore on sale of petrol, diesel, domestic LPG and PDS kerosene in 2008-09 in absence of any price hike or duty cut.