‘We will watch global crude prices and rupee rate before taking final decision’

Despite street protests and condemnation by political parties, including the ruling Congress, Petroleum and Natural Gas Minister Jaipal Reddy on Friday ruled out withdrawal of the steep increase in petrol price. He, however, said the government would review the situation within a few days.

“We will watch the international crude prices and the rupee-dollar rate for a few days before taking any decision on cutting the rates. I seek the cooperation of all political parties on the issue of oil prices. Finance Minister Pranab Mukherjee and I will hold consultations with the Chief Ministers very soon to try to come to a common understanding on taxing petroleum products at the State and Central levels,” he told journalists here.

Mr. Reddy said he had been urging Mr. Mukherjee to convene a meeting of the Empowered Group of Ministers (EGoM) to discuss the high subsidy on domestic LPG diesel and kerosene. He defended the petrol price increase by the oil marketing companies, saying they had exhausted all options. “All political parties, including my own party [the Congress], are populist. But we cannot run the country on populist sentiments.”

The oil companies lost more than Rs.7,100 crore in the past two years on petrol sales, though they had the freedom to adjust the rates in line with the cost. In April and May this year, they lost Rs. 2,330 crore.

“We are duly conscious of the sense of disturbance among consumers. The hike was necessitated by the double disaster of devaluation of the rupee against the U.S. dollar and the increase in international oil prices. There is a downward trend in international oil prices, but it will be hasty to arrive at a conclusion that retail… prices can be reduced on the basis of this trend of a few days. We are not able to take a definitive view because there is a lot of volatility in the value of rupee vis-à-vis the dollar and the volatility in prices of crude oil,” he said.

“We, in the Petroleum Ministry, have decided to watch the situation for just a few days. When I say a few days, it is not weeks. We want to know if the falling prices of crude oil are a stable trend. We will certainly come back to you with our viewpoint very soon on the issue of review,” he said.

Asked about the opposition to the hike from within his own party, he said the Congress was also a political party, and like others, it did not want to advocate unpopular causes, even if they were unequivocal.

Gasoline price, against which the petrol price has been benchmarked, has come down from $124 a barrel (which was the basis of Wednesday's increase) to $117. The rupee has rebounded to 55.37 on Friday.

Congress Core Group meets

Meanwhile, the Congress Core Group met in the evening to discuss the political fallout of the price increase. No decision was taken as it was felt that Mr. Reddy had conveyed what the government had to say for the moment.

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