Cites strengthening of rupee against dollar
With the Manmohan Singh government already battling on many fronts, including rising interest rates and high inflation, oil marketing companies (OMCs) on Friday decided not to go ahead with the petrol price hike citing strengthening of the rupee against the dollar as the reason.
The OMCs, which originally were to review the petrol price on Thursday, deferred the move after a prolonged meeting. However, insiders said the OMCs were advised on Thursday night by the Petroleum and Natural Gas Ministry to wait for a day before announcing a decision.
“The OMCs were waiting for political nod to go ahead with a hike which could have been around 60-70 paise. But the Ministry on Friday decided not to press with the hike as the companies could absorb such a meagre loss. With the rupee strengthening further, it made it easy to take a decision against the hike,” a senior official remarked.
Officials said the Ministry, along with the UPA government, was concerned that at a time when there was a clamour for lowering interest rates and the inflation was showing signs of softening, any kind of hike would have added to the inflationary pressures and resulted in complicating the situation for the government and the Reserve Bank of India (RBI), which was to review the monetary policy on Friday.
‘Monitoring the situation'
“In view of the RBI having taken steps and the rupee having strengthened, the Indian Oil Corporation management is reviewing the situation and will decide on the petrol price revision at an appropriate time,'' an IOC statement said. The OMCs reduced the petrol prices twice on November 16 and December 1 following softening of crude prices in the international market. Petrol price was cut by Rs. 2.22 per litre on November 16 and by another 78 paise per litre from December 1.
However, continued poor performance of the rupee against the dollar and its fall to a new low of Rs. 54.30 on Thursday and the Indian basket of crude averaging $111.11 per barrel in Singapore from the previous $108 per barrel made the task difficult for OMCs. The under-recovery on petrol stands at around 50 paise per litre.
Keywords: petrol price hike