After last week’s 12 per cent increase in the price of petrol caused much unrest, the government is having second thoughts on raising prices of diesel and cooking fuels. Speaking after an inter-ministerial group meeting on inflation on Monday, Petroleum Minister S Jaipal Reddy said the government was not considering any increase in diesel, domestic LPG and kerosene prices.
Unlike petrol that has 1.09 per cent weight in the wholesale price index, the three controlled fuels have a combined direct impact of 6.23 per cent. Inflation had increased to 7.23 per cent in April, pushed by a double-digit increase in food inflation. Diesel, with 4.6 per cent weight, has an indirect impact on food prices. Reddy’s statement came even as the government is yet to finalise a date for a meeting of the empowered group of ministers (EGoM) on fuel pricing. “We are not considering a hike in prices of diesel, domestic LPG and kerosene. It is out of the question right now,” Reddy told reporters after the meeting.
Chief Economic Adviser Kaushik Basu was also present at the meeting. “It was only a meeting of the inter-ministerial group to look at the question of inflation. I was requested to come and offer my insights before they finalise their group recommendations,” Reddy said. “I focused on the price of diesel and its impact on inflation as a whole.”
Reddy had last week stated he had asked the finance minister to convene a meeting of the EGoM, headed by Mukherjee. Though the government has been hinting at an increase in retail prices, Reddy himself appears to be bowing to political pressure. “I am not going to touch the prices of LPG, diesel, kerosene. Period,” Reddy told reporters. A day after the price hike was announced on May 23, key UPA allies DMK, NCP and Trinamool Congress skipped a Cabinet meeting. Trinamool Congress President and West Bengal Chief Minister Mamata Banerjee even held a rally in protest against the hike.
With crude oil moving in the range of $104-105 a barrel and the rupee depreciating to around Rs 55 a dollar, government-controlled oil marketing companies (OMCs) have been demanding a review of petroleum prices. Prices of the three controlled fuels were revised last June. OMCs are currently losing Rs 512 crore daily on selling diesel, domestic LPG and kerosene below market prices.