The Hindu : National : Big hike in petrol prices under study

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Tuesday, May 27, 2008
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National

Big hike in petrol prices under study

Sujay Mehdudia

Deregulation of petrol could see its price jumping by Rs.15 to Rs.16 a litre

NEW DELHI: Despite political setbacks for the Congress leaving little room for a hike in motor fuel prices, the Petroleum Ministry is toying with the proposal for a “massive hike in petrol” prices to bring them on a par with the market rates.

Diesel, LPG and kerosene, however, will be left untouched. The deregulation of petrol could see its price jumping by Rs.15 to Rs.16 a litre.

Official sources said that another proposal was to ask petrol pumps to supply only high priced petrol or diesel to SUVs (sport utility vehicles) and luxury vehicles in the premium segment to prevent subsidisation for this elite category that has the capacity to pay.

“If the State governments can charge road tax on the basis of the category of the vehicle, why can’t motor fuels be supplied on this pattern preventing its impact on the poor or lower middle class,” a senior Ministry official said.

Dual fuel policy

The dual fuel policy that is likely to be put up for the government’s consideration could result in petrol witnessing a sharp increase of Rs.15 to Rs.16 a litre.

However, diesel would continue to be supplied at subsidised prices to prevent inflation and a cascading effect on the economy.

“There is a serious proposal to decontrol the prices of petrol in view of the international crude oil prices touching $135 a barrel and the under-recoveries threatening to go out of hand and touch Rs. 200,000 crore,” the official said.

Petrol is currently being sold at a loss of Rs.16.34 a litre and diesel at Rs.23.49 a litre.

Opposition likely

However, officials fear that the proposals might not find many takers within the government in view of the setbacks the Congress suffered in the Karnataka Assembly polls and Lok Sabha by-elections.

The government is also worried about the negative impact the hike will have on inflation.

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