A core group of Congress leaders will meet this evening to discuss the steep petrol price hike of Rs. 6.28 plus taxes effected on Wednesday and that has people and political parties enraged. Right now the Prime Minister is meeting Oil Minister Jaipal Reddy and officials from key economic ministries.
There has been talk that there could be a rollback of about Rs. 2 to Rs. 2.50 to address the demands for a withdrawal of the price hike. The demand for a rollback has come even from within the Congress, which leads the UPA government at the Centre. Sources say that Opposition parties and allies apart, leaders of the Congress too have said they did not know about the price rise.
Sources also said that the hike could well have been structured with a margin for rollback built in to counter the demand of allies and the expected public anger. In November last, petrol prices were raised by Rs. 1.80, but the hike was withdrawn after much political pressure, including from the Congress.
The party has reportedly given the states that it rules instructions to cut local taxes on petrol to reduce the burden on people. The Congress governments in Uttarakhand and Kerala announced cuts in Value Added Tax on petrol yesterday.
The government has pointed out that petrol is deregulated and so subject to market prices. And that state-owned oil companies and not the government, raise prices. But there have been spontaneous peoples’ protests across the country and allies like the Trinamool and DMK and “friends” of the UPA like the Samajwadi Party have insisted on a rollback.
The revision in petrol prices came as the rupee hit an all-time low against the dollar. Finance Minister Pranab Mukherjee 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.
State-owned oil companies explained the steep hike as imperative given the losses that they have been incurring. They said they had waited for a moment when the price hike could be lower and also said prices, dictated by market considerations, could also fall soon.
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.