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A Partial Rollback Or A Diesel Price Hike?

BW Online Bureau Nov 08, 2014

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[A planned meeting by a committee of ministers headed by Finance Minister Pranab Mukherjee to discuss raising diesel, liquified petroleum gas and kerosene prices looks in doubt following widespread protests and political backlash to the massive petrol price hike the day before. In fact, the head of state-run oil company HPCL S.Roy Choudhury, said on Thursday he had not been informed of a possible hike in diesel prices by the government.  The Reserve Bank of India (RBI) has an option to sell dollars directly to state oil companies, governor <a class="cite" id="/controller/search.action?type=entity&entityId=http%3A%2F%2Fd.opencalais.com%2Fpershash-1%2F7bdc81dc-b201-3b26-bfe7-03bd04eea968&display=%22Duvvuri%20Subbarao%22">Duvvuri Subbarao</a> said on Thursday, to help ease pressure on the rupee that hit another record low. The Opposition is planning an united onslaught on petrol price hike and price spiral and efforts are on to forge a larger political consensus for Bharat Bandh on the issue on May 31. In fact, a partial rollback in petrol price hike may well be on the cards and the steep increase of over Rs 7.50 per litre could have a built-in rollback factor. However, R.S. Butola, Chairman,  Indian Oil Corp , said on Thursday the country's biggest refiner may cut petrol prices if global crude prices drop, but it will not immediately roll back the hike. Butola said the company will review petrol prices again in early June. State oil companies raised the price of petrol on Thursday for the first time in more than six months in a gesture of fiscal discipline that economists said is unlikely to give a significant lift to the embattled rupee. State oil companies together lost roughly $830 million by selling petrol at below market prices since the last price revision in December, P.K. Goel, head of finance at Indian Oil, said on Thursday. India imports 80 per cent of its oil. Taking Political Bull By The Horn Meanwhile, the Congress has also distanced itself from the decision to hike petrol price, saying that it was a unilateral step and the party was not consulted. Asking the government to rollback petrol price by at least Rs 3, the party also advised the government not to go ahead with an increase in diesel price, which is politically much more crucial. Congress allies and some of its chief ministers have demanded a rollback, saying that the steep hike was not necessary when the inflation was already spiralling out of control. Key allies like the Trinamool Congress and DMK have said that they were not consulted on the hike while Kerala Chief Minister Oomen Chandy has written to Prime Minister Manmohan Singh to reconsider the decision. India's hefty subsidy bill for diesel, kerosene and liquid petroleum gas (LPG), fuels used in poorer homes, for public transport and for cooking, is a budget-buster that forces heavy government borrowing and weighs on investor sentiment. High global energy prices and a declining rupee, meanwhile, exacerbate the current account deficit in a country that imports 80 percent of its oil. "Petrol is a low-hanging fruit, as the challenges will come when the government would be deciding on diesel, liquefied petroleum gas, and kerosene, because this is where the subsidies are larger," said Shubhada Rao, chief economist at Yes Bank told Reuters in Mumbai. "Signal-wise, it is a step in the right direction." "We think the government's ability to implement this price hike could raise market expectations about price hikes in other more critical fuels. While diesel prices in particular would need immediate attention, significant price increases are unlikely, in our view," Goldman Sachs wrote on Thursday. Meanwhile, the NDA has given a Bharat Bandh call for the day, the Left parties have decided to observer an 'All India Protest Day' on May 31 that will include strikes, picketing, demonstrations, rasta roko and rallies against the hike. Sources in the Opposition camp said that efforts are also on in rope in the UPA allies like Trinamool Congress and DMK, who have opposed the fuel price hike yesterday. JD-U President Sharad Yadav has also talked to Left parties and SP supremo Mulayam Singh Yadav in this regard, while attempt is on to take BJD and AIADMK also on board for the May 31 agitations, the sources said. Samajwadi Party is supporting the UPA government from outside. A leader from the Opposition speaking on the condition of anonymity said that the attempt is to re-enact a scenario of July 5, 2010 Bharat Bandh, when opposition parties from north and south with conflicting ideologies like that of BJP and Left had coordinated their agitations to unitedly oppose the fuel price hike. Rejecting government's argument that the hike in petrol prices has been done by petroleum companies as the pricing of petrol stands deregulated, Yadav said, "This is an eyewash... We (NDA) are going to observe a Bharat bandh on May 31." In a press statement, the Left parties, CPI-M, CPI, RSP and All India Forward Bloc said that the Left parties strongly condemn the steep increase in the price of petrol. "This is a savage attack on the people, who are already suffering from the effects of continuous price rise of all essential commodities...In order to build a sustained movement to demand a rollback of price hike, Left parties have decided to observe an All India Protest Day on May 31," it said. CPI-M general secretary Prakash Karat said that steep hike in the petrol price was expected. "That is why we said yesterday that Government should not increase the prices otherwise we would conduct all India protests. We will continue the protests till we get the government to roll back the prices," Karat told reporters here. He said that the Left has called for a hartal in different states. "We are having different protest actions," Karat said. Opposing the steep hike in petrol prices and spiralling prices of commodities, the JD(U) President said the government has also been a "total failure" in checking prices of essential commodities. "Government has washed its hands off the decision on price hike but in reality this happens only when Government wants. The government will also be increasing prices of diesel and LPG after the Presidential elections get over," Yadav said. He asked why the hike in petrol prices was not announced when Parliament was in session and why oil companies did so the very next day after the Budget session got over. The NDA convenor said that while all the partners of his alliance have already been consulted on the issue of bandh, efforts will also be to reach out to other parties for the agitation as the matter is not a political one but that concerns common man. While Congress has so far officially reacted cautiously on the issue saying that it was a decision by the petroleum companies, party leaders speaking on condition of anonymity have expressed discomfiture with the move. In a sudden development, Oil Minister S Jaipal Reddy today cut short his official visit to Turkmenistan by a day to be in the national capital to field questions on the steepest ever increase in the fuel price a day after state-owned oil companies hiked petrol price by a massive Rs 7.54 a litre.