We were compelled to do so because oil public sector undertakings were faced with Rs74,300 crore under recoveries the oil minister said.
As opposition parties braced up for a nationwide strike against the hike in fuel prices, oil minister Murli Deora on Wednesday justified the decision, saying the increase translated to less than Re1 per day on domestic liquefied petroleum gas (LPG) and 26-27 paisa a day on kerosene, reports PTI.
"No benefit will accrue with this kind of adventurism. We want people and opposition parties to understand the compulsions under which we took this decision and what impact it will have on people," Mr Deora told reporters in New Delhi.
Describing claims made by critics of the 25th June decision as ‘exaggeration’, he said the Rs35 increase in the price of LPG cylinders translated into an additional burden of less than a rupee per day, considering a bottle of domestic gas lasts 30-35 days. The Rs3 a litre hike in kerosene translated into an additional burden of 26-27 paisa per day, Mr Deora said.
"We have kept the burden on the poor man the minimal. The talk of the hike breaking the back of the poor and common man is nothing but exaggeration. The facts are before you," he said.
BJP and Left parties have separately given a call for a nationwide strike on 5th July against the fuel price hike.
Mr Deora refused to answer questions on a rollback, saying, "I do not know anything (on that)."
Alongside the hike in LPG and kerosene rates, the prices of petrol were freed from government control, leading to an increase in the rates by Rs3.5 per litre in Delhi from 26th June. Diesel prices were also deregulated, but the rates increased by Rs2 per litre only, in preparation for an eventual freeing of prices.
"The National Democratic Alliance (NDA) government raised price of public distribution scheme (PDS) kerosene from Rs2.52 per litre in January, 1998, to Rs9 per litre in March, 2002. This hike was 258%, even though crude oil prices rose by just 147% during the period," Mr Deora said.
The Congress-led United Progressive Alliance (UPA) government did not increase kerosene prices for the past six years, despite the price of crude oil (the raw material for making petrol, diesel, domestic LPG and kerosene) more than doubling from $36 a barrel in May, 2004, to $78.
"We raised kerosene rates by Rs3 per litre against the required increase of Rs18.07 per litre. We have ensured that the poor are not unnecessarily burdened," he said.
The oil minister said,"We will continue to subsidise LPG and kerosene, which are the common man's cooking fuels. Even after last week's price increase, kerosene price is Rs15.07 per litre below cost and LPG is under-priced by Rs226.90 per cylinder."
The United Front government, of which the Left parties, TDP and Samajwadi Party were constituents, in November, 1997, notified full deregulation of the prices of petrol, diesel, LPG and kerosene by 2002.
According to this schedule, the rates of kerosene and LPG should have been at least double the revised price of Rs12.32 per litre and Rs345.35 per cylinder respectively.
Mr Deora said Prime Minister Manmohan Singh on Tuesday stated that the government had taken care that the poorest sections of society are not impacted and so, kerosene and LPG prices would continue to be regulated.
"We want support of the people and the opposition (on the issue of fuel price hike)," he said. "The increase in kerosene price will also help stop adulteration and diversion of PDS kerosene to open market."
The pre-hike price of Rs9.32 per litre made kerosene lucrative for adulteration in fuels like diesel as also diversion in open market.
The NDA government, he said, had in April, 2002, freed petrol and diesel prices from government control, with the rates being revised twice a month based on international prices.
"We have freed price of petrol, a fuel that is used in cars. Diesel prices will be eventually freed, but the government reserves the right to intervene in case of sharp spike or excessive volatility in global prices," he said.
"What we did was bare necessity. We were compelled to do so because oil public sector undertakings (PSUs) were faced with Rs74,300 crore under recoveries (revenue loss on fuel sales this fiscal)," the minister said. "The opposition is being a hypocrite in its criticism."
Even after the hike, oil PSUs would be saddled with Rs53,000 crore of under-recoveries. "Petrol price has increased only 53% and diesel 85% since May, 2004, despite crude oil prices rising by 111%," Mr Deora said.
The Sensex bounced back from 17,374. But it is too early to say whether the uptrend has resumed
The domestic market, which opened lower, gained momentum as European markets opened on a strong note. The Sensex settled at 17,701; up 167 points (0.9%) and the Nifty shut at 5,312, up 56 points (1%). Trading was range-bound till afternoon. The indices surged in the early afternoon session and closed marginally from the high point of the day.
Asian markets were down for the second day in a row on Wednesday as investors stayed away from risky positions before the quarter-end amid concerns over banks' funding conditions in Europe. Key benchmark indices in Taiwan, South Korea, Japan and Singapore fell by 0.5% to 1.9%. Indonesia's Jakarta Composite rose 0.52%. China's Shanghai Composite was down 1.1% after slumping 4.3% in the previous session, on concerns over the second-half economic slowdown. Hong Kong's Hang Seng was down 0.5%.
US stock markets were down on Tuesday and the S&P 500 was down to its lowest level in eight months as sentiment was subdued on concerns over the global economic scenario. US consumer confidence was down in June after rising for three months, while single-family home prices unexpectedly climbed in April. The Dow was down 268 points (2.6%) to 9,870. The S&P 500 was down 33 points (3.1%) to 1,041.2. The Nasdaq was down 85 points (3.8%) to 2,135.
Back home, the monsoon is running behind schedule in the main sugar- and rice-producing regions, and is not likely to revive in the next few days, the weather office said. The monsoon has covered south India and parts of eastern and central India and has not moved to other areas over the past 11 days as unfavourable weather conditions have inhibited monsoon winds.
Prime minister Manmohan Singh said on Tuesday that capital inflows have not become a problem for the Indian economy as of now and the country does not face a situation that requires imposition of capital controls.
The government may reduce the size of scheduled market borrowings for the second week in a row if tight cash conditions do not ease. The government has reduced the scheduled debt auction for this week to Rs100 billion from Rs130 billion. In the coming week, the government will borrow Rs120 billion. An outflow of $27.9 billion from the banking system on 3G spectrum auction and advance tax payment has caused the cash crunch.
Foreign institutional investors were net sellers in the equities segment, offloading stocks worth Rs261 crore on Tuesday. Domestic institutional investors offloaded stocks worth Rs114 crore.
Karur Vysya Bank (up 0.5%) has decided to fix the base rate at 8.50% p.a. effective from 1st July, while Corporation Bank (up 0.7%) and State Bank of Mysore (up 0.08%) have fixed the rate at 7.75%, and Syndicate Bank (up 0.7%) and Indian Overseas Bank (up 0.2%) have pegged it at 8.25%.
Larsen & Toubro (up 0.6%) has secured a slew of orders aggregating Rs1,015 crore from transmission and distribution projects in the international and domestic markets. The company's metallurgical, material handling and water sector divisions have also bagged orders worth Rs368 crore.
IVRCL Assets & Holdings (down 0.4%) has issued 1,000 Unsecured Redeemable Non-Convertible Debentures of Rs10 lakh each for cash at par aggregating Rs100 crore on a private placement basis. The coupon rate of the NCDs is 10.10% p.a. interest payable on a quarterly basis.
The heavily-armed Somali pirates roaming the waters in the Horn of Africa have made tens of...