Politics wins, Rs 2.2 cut in petrol price | business | Hindustan Times
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Politics wins, Rs 2.2 cut in petrol price

Egged on by political compulsions, in a long-awaited relief to the common man, the government finally cut the prices of petrol on Tuesday, even as oil marketing companies continue to be under financial strain. Anupama Airy reports. Relief at midnight | Jet fuel prices hiked

business Updated: Nov 16, 2011 11:46 IST
Anupama Airy

When economics goes out of control, it's time to bring in politics. Egged on by political compulsions, in a long-awaited relief to the common man, the government finally cut the prices of petrol on Tuesday, even as oil marketing companies continue to be under financial strain.

Coming just ahead of the winter session of Parliament that begins next week, in a well-timed political intervention, state-owned oil companies for the first time in nearly three years slashed petrol prices by around 3.2%.

Beginning Wednesday, the price of petrol will fall in Delhi by Rs 2.22 a litre and by Rs 2.34 a litre in Mumbai. http://www.hindustantimes.com/Images/HTEditImages/Images/16-11-11-metro1b.jpg

The last time petrol prices fell was in January 2009 and Tuesday's reduction is the first after controls over petrol prices were lifted by the government 18 months ago in June 2010.

The reduction more than neutralises the Rs 1.80 a litre hike in petrol price announced earlier this month.

More important for the government, it eases the pressure that had come up from both the Opposition and its most important ally, Trinamool Congress chief Mamata Banerjee, who had threatened to withdraw support but finally managed to squeeze out a good deal for her state.

Oil company sources hung the move on politics.

"The cut in petrol prices, its quantum and the urgency at which prices were slashed ahead of the Parliament session followed an informal diktat from the government, which was under severe political pressure from its allies ahead of several state elections," said a former oil company chief seeking anonymity.

"If it was good economics, then Indian Oil Corp should have first recovered its Rs 1,155 crore losses that it posted on sales of petrol in the first quarter."

Calling it "a de-regulation being followed in Indian style," energy expert Kirit Parikh did not rule out political compulsions outweighing economic considerations of state-owned oil firms, currently reeling under a huge financial strain on account of non-revision of prices of the other three sensitive fuels - diesel, cooking gas and kerosene.

"Despite the fuel being decontrolled and the government maintaining that it has no say in the fixation of petrol prices, we (oil firms) do seek an unofficial nod from the government before changing prices," said a top oil company official seeking anonymity.

"We had gained Rs 1.85 per litre (excluding all taxes) since the last price revision because of a fall in global oil rates and a marginal appreciation in rupee value. We are passing this on to consumers," IOC chairman RS Butola said after announcing the price cut.

"It is actually a rollback under protests by Mamata Banerjee and her party but the government does not want to call it so in the backdrop of softening of international oil prices," said an oil company official.