Diesel, kerosene, LPG prices hiked; excise, customs duties cut

New Delhi, Jun 24 (PTI) Biting the bullet, government
on Friday hiked the price of diesel by Rs 3 a litre, kerosene
Rs 2 a litre and cooking gas by a steep Rs 50 a cylinder to
raise Rs 21,000 crores, and slashed customs and excise duties
on petroleum products, sacrificing Rs 49,000 crore a year.
The hike in prices will be effective from midnight
Friday.
The Empowered Group of Ministers (EGoM), headed by
Finance Minister Pranab Mukherjee, met on Friday and took the
much-deferred politically sensitive decision, which Oil
Minister S Jaipal Reddy said was done to cut down on
burgeoning under-recovery of oil marketing companies.
The under-recoveries which stood at Rs 1,71,140 crores
will now come down by Rs 21,000 crores after Friday's
decision.
Friday's decision comes more than a month after
petrol price was hiked by Rs 5 a litre.

Reddy told a press conference that the price of
diesel would be raised by Rs 3 a litre, kerosene supplied
through PDS (Public Distribution System) by Rs 2 per litre and
domestic LPG by Rs 50 a cylinder.
He described the increase as "very modest and
minimal".
Giving details of the duty restructuring, Reddy said
the meeting decided on elimination of 5 per cent customs duty
on crude oil and all petroleum products , that will result in
a revenue loss of Rs 26,000 crores for the government for the
full fiscal year.
The excise duty on diesel has been reduced from Rs
4.60 a litre to Rs 2 a litre which will entail a revenue loss
of Rs 23,000 crore during 2011-12.
He said it could not be cut any further as the
special excise duty and the additional excise duty have been
earmarked for the central road fund and the educational cess.
On both these accounts, the government will incur a loss of Rs
49,000 crore.
The price hike would lead to an increase in
inflation by around 50 basis points, said Crisil Chief
Economist D K Joshi. Inflation now is hovering around 9 per
cent.
Reddy said the meeting considered the alarming
situation arising out of the projected massive under-
recoveries of the oil marketing companies which stood at Rs
1,71,140 crores in 2011-12 in the wake of high global crude
prices.
After the price hike and duty cuts, the oil marketing
companies would still be losing Rs 1,01,140 crores for the
current fiscal.
The decision on kerosene price hike comes exactly a
year after when the government had raised its rates by Rs 3 a
litre.