Govt hikes petrol price by a steep Rs 2.35 per litre, diesel by 50 paise

Marking the sixth increase in rates in last three months, petrol prices have been upped by a steep Rs 2.35 per litre. Oil firms had on June 1 raised petrol prices by 75 paise, excluding VAT, and followed it with a Rs 2 per litre increase on June 16, a Rs 1.82 increase on June 29, Rs 1.55 hike on July 15 and 70 paise increase from August 1. The recent increases in rates, which are already effective, are excluding local sales tax or VAT. The actual hike will be higher and will vary from city to city. While, Petrol price in Delhi will go up by Rs 2.83 to Rs 74.10 per litre, the same will cost Rs 81.57 per litre in Mumbai as against Rs 78.61 currently.

Further, in a parallel move, diesel price too have been hiked by 50 paise, excluding VAT, in line with the January decision of the government allowing oil companies freedom to raise prices in small doses every month to wipe out mounting losses. Latest hike marks the eighth hike in diesel prices since the January 17 and with this hike, most of the losses on diesel sales should have been wiped off by now to make the fuel market priced. However, the sharp depreciation of Indian rupee by 25% since the start of this year, has worsened this situation, with oil firms losing Rs 12.12 per litre despite prices being raised by a cumulative Rs 4.75 this year.

Furthermore, indicating the chances of bigger hike in the near future, Moily on August 30 wrote to PM, highlighting that without a price increase the government will have to shell out a record Rs 97,500 crore to subsidise diesel and cooking fuel. Moily, who sent an almost identical note to Chidambaram, underscored that one rupee increase in diesel price will cut loss by Rs 4,522 crore in remainder of current fiscal. While, a Rs 3 per litre increase would trim losses by Rs 13,565 crore and further, highlighted that if rates are raised by a one-time Rs 5 per litre, the losses would be cut to Rs 29,390 crore.