The revision in petrol prices comes as the rupee hit an all-time low of Rs. 56.19 against the dollar. The actual increase in prices will vary from state to state depending on sales and local VAT taxes. (Read: Petrol prices hiked, could diesel , LPG be next?)
Within half an hour of the new prices being announced, there were long queues at gas stations across the capital.
Amid anger from allies, Finance Minister Pranab Mukherjee said, "The decision has been taken, petrol is a deregulated commodity." That will not pacify key partners like Ms Banerjee, a senior member in the UPA coalition at the Centre.
She described the hike as "unjust and unilateral" and said allies had not been consulted by the Congress about the decision. She however clarified that her Trinamool Congress will not pull out of the government. "We are not like the CPM or other parties. We are for economic and political stability. Since we have a commitment to support the government, we are not exiting. But that does mean we will not protest what is wrong. What is going on is wrong, one-sided..." she said. She also asked why the government waited till after the Parliament session ended to green-light the price hike.
The DMK, another senior ally in the UPA, said the government should reconsider the hike and reduce it. "It is unfortunate, it will affect the salaried class, the common man," said the party's TR Baalu.
Party chief M Karunanidhi said his MPs will ask the Congress for a roll-back. On Tuesday, as the UPA celebrated its third year in power with a dinner at the PM's house, the DMK's MK Alagiri had said he gives the coalition 100% in its performance so far. The party's stand appears to have changed after the price hike.
Petrol will cost Rs.73.14 per litre in Delhi against the existing price of Rs.65.64 per litre. In Mumbai, petrol will now cost Rs.78.16 per litre, while in Kolkata and Chennai, it will cost Rs.77.53 per litre.
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.
Mulayam Singh Yadav might have taken centrestage at the UPA celebrations that the BJP scoffed at, but his Samajwadi Party was no less scathing about the petrol price hike, which it said was a "gift" to the common man from the government on completion of its three years in office. "We demand immediate roll back of petrol price hike. The decision is anti-people," SP spokesman Rajendra Chowdhury said.
Tamil Nadu Chief Minister J Jayalalithaa demanded an immediate rollback of the hike, warning that otherwise this would spell the doom for the "anti-people" UPA government.
The BJP has also demanded a rollback, accusing the Congress-led UPA government of burdening the common man through its "mismanagement of the economy".
"This whole petrol price hike is clearly unreasonable, arbitrary and is condemned as it will put further inflationary pressure and lead to further rise in prices. Life of the common man will become more difficult and miserable," BJP's chief Spokesperson Ravi Shankar Prasad said.
Gujarat Chief Minister Narendra Modi tweeted, "This decision to hike #petrol prices taken a day after the ending of Parliament session is a stinging rebuke to the dignity of Parliament."
His colleague, Nirmala Sitharaman, said, "This is a striking blow the UPA has given on completion of its third year in office...this is due entirely to mismanagement,"
Left leader D Raja said, "They have failed to manage the fiscal and the monetary situation in the economy. They will not stop here, this is just a prelude. They will hike the prices of diesel and other petroleum products. We will protest on the streets and they will have to roll back the prices."
The Congress' Rashid Alvi said his party had nothing to do with the hike and neither did the government that it led. "Global prices are up and the oil companies take their own decisions after petrol deregulation. India is part of the world and so it is affected too," Mr Alvi said.