The recent hike in fuel price is going to hit the common man, however, this move will reduce burden of oil companies only to the extent of Rs 21,000. The government increased the diesel price by Rs 3.37 per litre, LPG by Rs 50 per cylinder and kerosene rate has been increased by Rs 2 per litre. The decision to increases the prices was long awaited by the oil companies after the rise in petrol price last month.
This hike is believed to be one of the steepest in fuel prices for last some time, however, has proved little help to oil PSUs. According to IOC Chairman R S Butola, despite the Rs 3 per litre increase coupled with cut in customs or import duty from 7.5 per cent to 2.5 per cent and reduction in excise duty from Rs 4.60 per litre to Rs 2 a litre, diesel is still being sold at a loss of Rs 6.90 per litre. Similarly, kerosene is being sold at Rs 25.37 per litre loss and domestic LPG at a loss of Rs 331.13 per 14.2-kg cylinder. The state-run oil firms will end the fiscal with a whooping Rs 121,700 crore revenue loss on selling diesel, domestic LPG and kerosene at government rates, thus, the loss of oil companies will be reduced by Rs 21,000 crore only. However, this increase in prices will reduce liquidity strain of the said companies.
After taking into account the increase in diesel, domestic LPG and kerosene price as well as cut in customs and excise duty, the three oil marketing companies will see their under-recoveries (revenue loss) come down from Rs 171,140 crore to Rs 121,704 crore for the fiscal, as Rs 29,000 crore burden has been eased due to the duty rejig.
On the other hand, this move has affected the consumer and also increased tautness of already heightening inflation. However, the Empowered Group of Ministers who approved this rise stated that the move will have temporary impact on inflation.
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