At midnight on Wednesday petrol prices went up by a huge Rs 6.28 plus local taxes - the biggest hike in 10 years. The Opposition is threatening to launch a big agitation and the government's own allies and friends are bringing pressure on it to roll back the hike amid fears that LPG and diesel prices will go up next. Will the government effect a partial rollback?
The people who lined their vehicles up in serpentine queues at petrol stations last evening to get a cheaper tankfull before midnight, are very angry. (Petrol price hike: Top 10 surfer comments)
"They don't think, how will people afford a 7-and-a-half rupee hike? The prices are already sky high. This is very bad. The government should think about poor people as well," said a resident of Chandigarh.
"The price of the petrol has increased so much that forget to think about a four wheeler even two wheeler is now becoming unaffordable. The middle class is suffering very badly from this," said another.
The government says petrol is a deregulated commodity. "The decision has been taken said Finance Minister Pranab Mukherjee last evening. But the government's allies are not buying that. Mamata Banerjee has protested strongly and said the decision was not discussed with the government's allies even in Parliament which was in session till Tuesday. She said, "We don't want political instability. We made a commitment and if we topple the government now. There will be political instability. We are not like the Left. But just because we aren't leaving, doesn't mean that we won't protest or we won't oppose." The DMK's M Karunanidhi too says he was not consulted before the hike. And the Samajwadi Party too has asked for a rollback. "We demand immediate roll back of petrol price hike. The decision is anti-people," SP spokesman Rajendra Chowdhury said. (Read: Dinner diplomacy gone, Mulayam's party slams petrol price hike)
The Opposition has accused the government of choosing to make the announcement a day after the Budget Session ended to avoid getting cornered in Parliament. "Petrol price hike is atrocious and unbelievable. The UPA government, on its third anniversary, has given this gift of petrol price hike to the people. And that too Rs. 7.50 per litre. This is unheard of and unimaginable," said BJP leader Prakash Javadekar.
Even Lalu Prasad Yadav of the RJD, prominently feted at the UPA's celebratory dinner party on Tuesday said, "The hike was announced just a day after the Budget Session got over. It's a huge hike. And it keeps increasing." (Read: Petrol prices hiked, could diesel , LPG be next?)
Congress heads of government like Sheila Dikshit are upset, indicating that the price hike may once again position the Congress vs the government, and prompting speculation on whether a partial rollback may have been built into the hike.
The revision in petrol prices comes as the rupee hit an all-time low of Rs. 56.38 against the dollar. The actual increase in prices will vary from state to state depending on sales and local VAT taxes. The Congress government in Uttarakhand this morning announced that it was removing 25% VAT on petrol.
Finance Minister Pranab Mukherjee has blamed global uncertainties and the rising oil imports bill for the battering of the Indian currency. "The quantum of India's oil imports is substantial at around $160 billion to $170 billion annually," he said.
"Given the losses being incurred, the company is compelled to increase the price of petrol by Rs.6.28 per litre (excluding VAT/Sales Tax) with effect from midnight," the country's largest oil firm, Indian Oil Company, said in a statement. "This excludes losses already suffered till date during current financial year 2012-13, which would require an additional increase of around Rs. 1.50 per litre in selling price of motor spirit (MS) for balance part of the year," Indian Oil said.
India deregulated petrol prices in June 2010 but continues to subsidise kerosene, petrol and cooking gas to protect the poor from the impact of any inflation pressures. In the second half of 2011, oil companies began reflecting market realities more closely and raised petrol prices but were stopped from end-November on the request of the government - their majority shareholder - ahead of elections in some states. Petrol prices were last revised on December 1.
State-run oil companies have been losing Rs. 8000 crores per annum because they were being forced to sell petrol at subsidised rates.