New Delhi, August 31
Petrol price has been hiked by Rs 2.35 per litre and diesel by 50 paisa excluding state levies effective midnight.

This is the fifth increase in rates since June, as the falling rupee made oil imports costlier. The actual increase will be higher and will vary across the states depending on local taxes.

Indian Oil Corporation said in a statement that the hike in petrol prices is due to the depreciation of the rupee and the rise in crude oil prices due to tension in the Middle East region.

Consumers need to brace for a steep hike in prices of fuel after the Parliament session gets over next week. The government is considering hiking diesel prices by Rs 3-5 per litre, kerosene by Rs 2 per litre and LPG by Rs 50 per cylinder.

Petroleum Minister Veerappa Moily has written to Prime Minister Manmohan Singh to take steps to tackle a record Rs 1.80 lakh crore of under-recovery due to the rupee and surging oil rates.

Moily wrote that without a price increase the government will have to shell out a record Rs 97,500 crore to subsidised diesel and cooking fuel. “If the present position persists, the total under-recovery would reach to a level of Rs 1.80 lakh crore in the current financial year as compared to Rs 1.61 lakh crore during 2012-13,” he wrote to the Prime Minister.

A 25 per cent drop in rupee value has resulted in losses on diesel sales widening to Rs 10.22 per litre despite prices being raised by 50 paise a litre every month since January.

This coupled with Rs 33.54 a litre loss on kerosene and Rs 412 on sale of LPG cylinder, the total revenue loss this fiscal comes to Rs 1.80 lakh crore he said adding even after upstream firms like ONGC chip in Rs 70,500 crore, a gap of Rs. 97,500 crore would be left.

Moily, who sent an almost identical note to Finance Minister P Chidambaram, said a one rupee increase in diesel price will cut loss by Rs 4,522 crore in remainder of current fiscal while a Rs 3 per litre increase would trim losses by Rs. 13,565 crore. If rates are raised by a one-time Rs 5 per litre, the losses would be cut to Rs. 29,390 crore

The hikes proposed are one-time and are outside monthly revision in rates of 50 paise happening since January.

Similarly, a Rs 50 per cylinder increase in LPG rates would trim cooking gas losses by Rs 2,604 crore. Besides, a possible Rs 2 per litre hike in kerosene price would cut losses by Rs 1,014 crore. The three price increases together would bring down government’s subsidy outgo to Rs. 50,928 crore, he argued.