Excise hike on petro products catalyst for Price hike on Petro products from tonight

The government is set to announce a hike in the prices of auto fuels like petrol prices by Rs 2.71 per litre and diesel prices by Rs 2.55 per litre with effect from tonight, Oil Secretary S Sundareshan said today.

The development came hours after Finance Minister Pranab Mukherjee announced an increase in excise and customs duty on petroleum products. During the Budget, opposition leaders staged a walk-out protesting the move would lead to an increase in fuel prices.

Leader of Opposition and BJP MP Sushma Swaraj led the walkout calling the Budget an “inflationary Budget”. That the government would chose to hike fuel prices so soon after the Budget might have surprised even the opposition.

During the Budget, Mukherjee had promised to decide on the recommendations of the Kirit Parekh Committee soon. The Kirit Parekh Committee favours the deregulation of auto fuel prices (petrol and diesel) and streamlining of subsidies for prices of cooking (LPG and kerosene).

Currently, the government sets prices of fuel, usually below cost of manufacture. As a result, oil companies run into losses of thousands of crores and the government compensates for the losses by issuing subsidies to the companies.

Critics of the move, whose idea is to help the poor, say regulated prices of fuel benefit the well-off too and advocate the aligning of fuel prices to international prices of crude.