Sources said there could be an announcement of a Rs 2 to Rs 2.50 rollback in prices tomorrow. There is much political pressure on the government to withdraw the hike; sources said Opposition parties and allies apart, even leaders of the Congress, which heads the UPA, have said they did not know about the price rise and have joined the chorus that it be withdrawn.
A party vs the government positioning by Congress president Sonia Gandhi would allow the ruling party some respite from a political backlash and sources said the hike could well have been structured with a margin for rollback built in to counter the demand of allies and the expected public anger. In November last, petrol prices were raised by Rs 1.80, but the hike was withdrawn after much political pressure, including from the Congress.
Congress chief ministers like Shiela Dikshit had expressed concern yesterday and the party had reportedly given the states that it rules instructions to cut local taxes on petrol to reduce the burden on people. Uttarakhand, which has one of the newest Congress governments, announced a 25% cut in value added tax on petrol this morning.
Officially the Congress’ spokesmen have been fielding tough questions and pointing out that petrol is deregulated and so subject to market prices. And that state-owned oil companies and not the government raise prices. Oil Minister Jaipal Reddy, who is in Turkmenistan to sign a natural gas deal, has been asked to return and he shall do so today, a day earlier than scheduled.
Ally Mamata Banerjee has protested strongly and said the decision was not discussed with the government's allies even in Parliament which was in session till Tuesday. She said, "We don't want political instability. We made a commitment and if we topple the government now. There will be political instability. We are not like the Left. But just because we aren't leaving, doesn't mean that we won't protest or we won't oppose." The DMK's M Karunanidhi too says he was not consulted before the hike. And the Samajwadi Party too has asked for a rollback. "We demand immediate roll back of petrol price hike. The decision is anti-people," SP spokesman Rajendra Chowdhury said. (Read: Dinner diplomacy gone, Mulayam's party slams petrol price hike)
The Opposition has accused the government of choosing to make the announcement a day after the Budget Session ended to avoid getting cornered in Parliament. "Petrol price hike is atrocious and unbelievable. The UPA government, on its third anniversary, has given this gift of petrol price hike to the people. And that too Rs. 7.50 per litre. This is unheard of and unimaginable," said BJP leader Prakash Javadekar.
Even Lalu Prasad Yadav of the RJD, prominently feted at the UPA's celebratory dinner party on Tuesday said, "The hike was announced just a day after the Budget Session got over. It's a huge hike. And it keeps increasing." (Read: Petrol prices hiked, could diesel , LPG be next?)
The revision in petrol prices comes as the rupee hit an all-time low of Rs. 56.38 against the dollar. The actual increase in prices will vary from state to state depending on sales and local VAT taxes.
Finance Minister Pranab Mukherjee has blamed global uncertainties and the rising oil imports bill for the battering of the Indian currency. "The quantum of India's oil imports is substantial at around $160 billion to $170 billion annually," he said.
"Given the losses being incurred, the company is compelled to increase the price of petrol by Rs.6.28 per litre (excluding VAT/Sales Tax) with effect from midnight," the country's largest oil firm, Indian Oil Company, said in a statement. "This excludes losses already suffered till date during current financial year 2012-13, which would require an additional increase of around Rs. 1.50 per litre in selling price of motor spirit (MS) for balance part of the year," Indian Oil said.
India deregulated petrol prices in June 2010 but continues to subsidise kerosene, petrol and cooking gas to protect the poor from the impact of any inflation pressures. In the second half of 2011, oil companies began reflecting market realities more closely and raised petrol prices but were stopped from end-November on the request of the government - their majority shareholder - ahead of elections in some states. Petrol prices were last revised on December 1.
State-run oil companies have been losing Rs. 8000 crores per annum because they were being forced to sell petrol at subsidised rates.