The caretaker government on Friday night pushed through another hike in the prices of petrol by Rs26.02 per litre and high-speed diesel (HSD) by Rs17.34 per litre. The increase brings the price of petrol to Rs331.38 per litre while HSD is Rs329.18 per litre, the Ministry of Finance said in a post on X (formerly Twitter) after midnight.
This is the second time within a month that prices of petroleum products have been increased to take them to a historic high.
On September 1, the caretaker government had jacked up the petrol and diesel prices by over Rs14.
The Finance Division said the hike was due to the “increasing trend of petroleum prices in the international market and exchange rate variations”. Back then the price of petrol went up by Rs14.91 per litre, and the price of high-speed diesel (HSD) by Rs18.44 per litre.
The hike in petrol prices was expected due to the rise in global oil prices. Most of the transport sector runs on HSD. Its price is considered highly inflationary as it is mostly used in heavy transport vehicles, trains and agricultural engines like trucks, buses, tractors, tube wells and threshers, and particularly adds to the prices of vegetables and other eatables. Petrol, on the other hand, is mostly used in private transport, small vehicles, rickshaws and two-wheelers and has a direct bearing on the budget of middle- and lower-middle class. The increase in prices of petroleum products came on the heels of over 27.4 per cent increase in the August rate of inflation that would also have a lag effect on general prices in the country over the coming days and weeks.
At present GST is zero on all petroleum products, but the government is charging Rs60 per litre petroleum development levy (PDL) on petrol and Rs50 each on HSD and high octane blending component and 95RON petrol. The government is also charging about Rs18 to Rs22 per litre customs duty on petrol and HSD. Petrol and HSD are the major revenue spinners with their monthly sales of about 700,000-800,000 tonnes per month compared to just 10,000 tonnes of monthly demand for kerosene. According to Reuters, Oil prices hit a 10-month high on Friday and were set to post a third weekly gain as supply tightness spearheaded by Saudi Arabian production cuts combined with optimism around Chinese demand to lift crude. By 12:15pm EDT (1615 GMT), US West Texas Intermediate futures were up 62 cents, or 0.7%, to $90.78 a barrel and Brent crude futures were up 21 cents, or 0.2%, to $93.91 a barrel. Both benchmarks hit their highest since November 2022 earlier in the session, and are up about 4% for the week. The government reviews and adjusts the petroleum prices every fortnight, based on Ogra’s recommendations. The final decision, however, rests with the finance ministry, which sometimes absorbs part of the increase to provide relief to consumers. But the government has to raise fuel prices as agreed with the International Monetary Fund (IMF) under a $3 billion standby agreement.
