After months of dithering, the government on Thursday finally raised petrol price by Rs 2 a litre and diesel by Re one per litre with effect from midnight tonight.
The Cabinet Committee on Political Affairs, which took up the matter instead of the Cabinet Committee on Economic Affairs because of the political sensitivity of the issue when general elections are not far away, however, decided against lowering duties to cushion the impact of surging international oil prices.
"Petrol and diesel prices will be increased from midnight tonight," Petroleum Minister Murli Deora told reporters. The CCPA decided to raise the quantum of oil bonds to be issued to state-run oil retailers to partly compensate them for selling auto and cooking fuel below cost, he said.
Presently, 42.7 per cent of the under-realisation on petrol, diesel, LPG and kerosene is met by the government through issuance of oil bonds. This percentage has now been raised to 56-57, Petroleum Secretary MS Srinivasan said.
Government, in this financial year, will issue Indian Oil, Bharat Petroleum and Hindustan Petroleum oil bonds worth over Rs 40,212 crore at the enhanced rates.
Upstream firms like ONGC and GAIL would chip in 33 per cent (Rs 23,700 crore), while the remaining of the Rs 71,808 crore under-realisation would be borne by the retailers.
A Rs two per litre increase in petrol price would give Rs 180 crore a month additional revenue to public sector oil companies while Re one a litre hike in diesel would fetch Rs 360 crore a month.
"For the remaining part of the fiscal, we anticipate additional revenue of Rs 840 crore," Srinivasan said.