Petrol & Diesel Price Hike

The Cabinet today decided to hike the price of Petrol By Rs. 4 per Lt. and Diesel by Rs. 2 per Lt. The goverment decided not to increase the price of Kerocene and LPG. This is the third price hike by the UPA government after they got into power. The OIL companies were already demanding price hike as much as Rs. 10 per Lt. for Petrol as well as Diesel. The goverment in order to keep the burden off the shoulders of the consumers has plans to float oil bonds and cut sales tax to meet the demands of the oil companies.

The price hike of Rs. 4 per Lt. for petrol is higher than the expected Rs. 2 hike. At the same time the Rs. 2 hike expected for Kerosene was not seen. People accross the country are showing their anger at this price hike. They are complaining that that fuel price hike would create a spiral of price hikes of various goods and commodities.

Price Impact on Metros

	Diesel Price	Petrol Price
Delhi	style="text-align: right">Rs. 32.45	style="text-align: right">Rs. 47.51
Kolkata	style="text-align: right">Rs. 34.87	style="text-align: right">Rs. 51.07
Mumbai	style="text-align: right">Rs. 39.57	style="text-align: right">Rs. 53.50
Chennai	style="text-align: right">Rs. 35.72	style="text-align: right">Rs. 50.07

It is important to notice that the goverment had to make this decision because of the high crude oil price. It is said that in the international markets the crude oil has jumped $ 7.5 per bl. from the time of the last price hike. A total relief of Rs. 43,700 cr. is given by the goverment to the oil companies out of which only Rs. 9,200 cr. comes form the price hike and Rs. 6,500 cr. from the sales tax cut of 2.5 %, 10 % to 7.5 %.

Let us hope that this price hike does not change the economic fundamentals of the country. Inflation which is somewhat under control as per the Finace Minister might jump up. This could lead to increase in the interest rates which would put brakes over the economy and we might have say good bye to the 8 % plus GDP growth.