Agencies

New Delhi, Jun 5: The Cabinet in a meeting on Monday decided to hike the petrol price by Rs 4 and diesel price by Rs 2. However, there LPG and kerosene have been spared. The price hike will be effective from Monday midnight.

The hike, approved by the Cabinet chaired by Prime Minister Manmohan Singh, was only a fraction of the increase actually needed to offset the spiraling international oil prices.

Petrol prices needed to be raised by Rs 9.33 per litre, diesel by Rs 10.43 a litre, PDS kerosene by Rs 17.16 per litre and domestic LPG by Rs 114.45 per cylinder.

A Rs 4 a litre hike in petrol and Rs 2 per litre increase in diesel prices would give oil firms Rs 9,200 crore, still a far cry from the projected Rs 73,500 crore revenue loss projected for 2006-07 due to firming up of global oil prices.

While petrol and diesel prices were last revised in September 2005, kerosene prices have remained unchanged since March 2002 and LPG since November 2004 despite a 60 per cent jump in cost of raw material (crude oil).

Sources said Petroleum Minister Murli Deora proposed that the share of subsidy burden on upstream firms - ONGC, GAIL and OIL - be raised to Rs 24,000 crore this fiscal from Rs 14,000 crore last year to partly offset the Rs 73,500 crore under-realisation.

Petroleum Ministry projected under-realisation of Rs 8,390 crore on petrol, Rs 37,940 crore on diesel, Rs 19,403 crore on kerosene and Rs 7,779 crore on LPG this fiscal if either prices or duties were kept unchanged.

The Cabinet also approved reduction in customs duty on petrol and diesel from 10 to 7.5 per cent, besides issuance of Rs 28,000 crore oil bonds to PSUs.

Earlier in the day, the CPI-M said that the proposal to increase the price of petroleum products was not justified, as the Government has gained from the rise in prices of crude and should share some of the windfall with the oil marketing companies.

The party said that to insulate consumers from the hike, a price stabilisation fund should be created from the cess of Rs 2,500 per MT for supporting oil companies and excise duty on products should be reduced and should be specific without any ad valorem content.