Petrol prices may go up by Rs 2 again

It is very likely that the prices of petrol and diesel might be increased by up to Rs 2 a litre by mid-September, following the tough stand taken by the finance ministry.

In a bid to ease the pressure on consumers, Petroleum Minister Murli Deora had shot off a letter to Finance Minister P Chidambaram seeking an immediate Re 1 per litre decrease in excise duty on fuel, but highly placed sources say that the latter has rejected the demand.

With global crude prices going through the roof, Indian oil companies will have no option but to hike prices by at least Rs 2 a litre, if the excise duty on petrol and diesel is not cut. Also, oil companies are in no position to absorb any further loss on account of selling fuel at subsidised rates.

Deora also fears a public outcry if fuel prices go up twice in two months: the last increase was in June. But with the finance minister refusing to entertain the demand, petro prices are likely to go up.

A recent government decision allows oil firms to revise the retail sale price of petroleum products -- including petrol, diesel, kerosene and liquefied petroleum gas (LPG) -- to adjust the increases beyond global prices.

'Oil companies would need government support if they are to continue serving the nation's oil needs. At this stage, we appear to have a few alternatives other than seeking a downward revision in excise duty of petrol and diesel,' Deora is said to have written in his letter to Chidambaram.

The petroleum minister has suggested that an excise duty hike in the 2005-06 Budget can be partially rolled back. In that Budget the 'government had increased the excise duty by about Rs 2.44 on petrol and Rs 1.65 a litre on diesel (based on prices applicable at that time) on revenue neutrality considerations.'

In the letter, Deora has also pointed out how the Indian basket of crude oil touched a high of $73.96 per barrel on July 14.