New Delhi:
The government has bitten the bullet and decided to implement one of its boldest reforms - decontrol of petrol prices. The move will lead to an immediate hike in petrol and other fuel prices and has political ramifications, but the government is looking at long term gains in aligning prices to international rates.
For the second time in less than three weeks, the Empowered Group of Ministers headed by Finance Minister Pranab Mukherjee met today to approve market driven increase in petrol prices.
Rail Minister Mamata Banerjee, who is part of the panel, did not attend the meeting and her absence is being attributed to her opposition to an increase in rates of diesel and cooking fuel. Mamata had skipped the last meeting on June 8 too.
Pranab Mukherjee met Mamata last evening and is believed to have explained the imperatives to her in a bid to take along all political allies on this crucial move.
NCP leader Sharad Pawar, the other key ally opposed to the hike and who too had skipped the last meeting, however, attended today's meeting.
Sources say while it's been easier to build consensus for freeing up petrol prices, allies are not convinced on decontrolling diesel prices right now given its inflationary impact. Even touching kerosene and LPG prices will be politically sensitive though a modest hike in cooking gas prices is also being considered.
Decontrol of fuel prices will mean that these will be freed from government control and will be aligned to global crude rates, giving freedom to oil marketing firms to fix petrol prices now.
This may result in a Rs 3.70 increase in petrol prices. The government may also consider a one-time increase in diesel prices of about Rs 2 a litre.
The move will help cut the fuel subsidy bill of the government and also trim mounting losses of oil firms.
"For oil companies to survive in the long run, it is important that the customer realises the actual price of the product", BM Bansal, Indian Oil Corporation (IOC) Chairman says.
Petroleum Minister Murli Deora has already asked states to lower petroleum taxes to cushion the impact on consumers but with inflation now in double digits, there's opposition building up already.
"In such a situation for the government to once again contemplate increasing the prices of fuel again is just shameful..absolutely shameful," said CPM Politburo Member Brinda Karat a few days ago.