Petrol to cost Rs 3.73 more, cooking gas dearer by Rs 35

NEW DELHI: In a major decision to bring petroleum products in line with market rates, the government today freed petrol from all pricing controls and hiked diesel prices by Rs 2 a litre, Oil Secretary S Sundareshan announced after the meeting of the Empowered Group of Ministers.

Petrol will cost up to Rs 3.73 per litre more, households will have to pay an additional Rs 35 per cylinder and poor man's cooking medium kerosene will be dearer by Rs 3 a litre from today, the government said here.

The decision follows a ministerial panel meeting on freeing up petrol prices and cutting subsidies on diesel, kerosene and cooking gas, to help rein in the fiscal deficit, which is projected at 5.5 percent of the gross domestic product in 2010/11 and free up revenues for other programmes.

The move will help boost profits of state-run oil firms that have been losing revenue from government-set lower prices. State oil firms currently lose about Rs 215 crore per day on selling fuel below the imported cost. At present, petrol is being sold at Rs 3.73 a litre below its cost, diesel at a loss of Rs 3.80 per litre, kerosene at Rs 18.82 a litre and domestic LPG at a discount of Rs 261.90 on every 14.2-kg cylinder.

Besides, this would also help cut down on the government's huge subsidy bills.

Even diesel prices will be eventually freed of all administrative controls, Sundareshan said.

The decisions, taken by the EGoM headed by Finance Minister Pranab Mukherejee, were timed appropriately to take advantage of relatively lower global crude prices, which are hovering around $77 a barrel.

Sundareshan said that the government would, however, continue to "heavily subsidise" the cooking fuels.

Oil Minister Murli Deora had, on more than one occasion, briefed Prime Minister Manmohan Singh and Mukherjee on the crisis that would befall oil PSUs if no decision was taken on hiking prices.

The decision would cause core inflation, already in double digits, to shoot up further.

In May, WPI-based inflation provisionally entered double digits at 10.16 per cent.