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Fuel hike inevitable, inflation crosses 8%

business Updated: May 24, 2008 02:24 IST

Hindustan Times
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The government may increase petrol and diesel prices next week, officials said on Tuesday as state-owned oil marketing companies mounted pressure for a steep hike in retail prices of the auto fuels.

“It (the price rise) is inevitable,” Petroleum Secretary M. S. Srinivasan said after a meeting with chief executives of oil companies. “The situation is alarming.”

The Petroleum Ministry has sought a hike of Rs 10 per litre of petrol and Rs. 5 per litre of diesel. But officials said the government would opt for a moderate increase as inflation has already crossed 8 per cent and elections in several states are due later this year.

Price data released on Friday put inflation at 7.82 per cent for the week ended May 10, but revised figures for previous weeks showed that it had already crossed 8 per cent in March.

The government is likely to issue more oil bonds and cut custom and excise duties on crude and oil products. It may also allow raising the borrowing limits for oil PSUs, a petroleum ministry official said.

Although global crude prices have almost doubled in the past year, the Indian government has not allowed oil companies to pass on only a fraction of it to consumers. “A decision needs to be taken immediately,” Petroleum Minister Murli Deora said.”