Post-G20 summit, Indian government has slashed petrol prices as expected, ahead of the winter session of parliament where the opposition was bracing for a battle on the floor of the house over the hike. The 3.2 percent cut would mean Rs. 2.22 rupees a litre of petrol, which has no subsidy component.
Ironically, diesel and kersene are still priced much lower than the market price taking a huge toll on state-run oil refiners. While the new petrol price will cost Rs 66.42 in Delhi, it will cost more than Rs 70 in the southern states.
The new petrol price will come into effect from the midnight of Tuesday. The refiners had raised the price by Rs. 1.85 just before Prime Minister Manmohan Singh’s G-20 summit at Cannes in Paris where he assailed subsidies and showcased the market-driven petrol price mechanism.
Another constraint on petrol price hike was the rapid devaluation in Indian currency which is Rs 50.66 compared to Rs. 45 three months ago. The steep fall has raised the import bill of crude oil into the country, besides the huge burden of subsidy on diesel and kerosene which were considered transporters’ and poor-man’s fuel for survival.
The petrol price has been the biggest thron in the country’s inflation since 1989. From Rs. 8.50 on April 1, 1989, petrol has gone up to Rs. 76 today in most parts of the country. While a reversal to Rs 66 to Rs. 70 now would mean a big relief, it may not even give little relief to the country’s inflation-hit middle class which is reeling under rising food and fuel prices. The central government is under pressure to opt for major structural reforms to control rapid inflation, which has hit hundreds of millions of poor people.
Despite continued subsidies, diesel too rose from Rs. 3.50 in 1989 to Rs. 46 currently. Even the LPG rose from Rs. 57.60 in 1989 to Rs. 400 now, despite the prime minister Manmohan Singh’s wife’s avowed opposition in her very first interview to the media in 2004 after his taking office.
From 1989 to 1991, petrol price doubled to Rs. 16.78 while diesel tripled to Rs. 6.98, while the LPG was spared from the hike. Enter 2000, the petrol price began to peak in tune with the global price, while diesel and LPG too saw steep hike, resulting in double digit inflation in the country.