Government owned Oil Marketing Companies (OMCs) raised the price of petrol by Rs 6.28 per litre on May 23, 2012. After the inclusion of local taxes, this price hike amounts to an increase of Rs 7.54 per litre in Delhi. India met 76 per cent of its total petroleum requirement in 2011-12 through imports. Petrol prices have officially been decontrolled since June 2010. However, it has been argued by experts that prices of petroleum products have not been increased sufficiently in order to pass on cost increases to consumers. The inability to pass on international crude prices to consumers has affected OMCs more in recent months due to the depreciating rupee, which has further increased their losses. The total under recoveries faced by OMCs for diesel, PDS kerosene and domestic LPG for 2011-12 stands at Rs 138,541 crore. It was recently announced that the OMCs will receive Rs 38,500 crore from the Ministry of Finance to partially compensate for the high under recoveries.
- Since petrol and diesel are both items of final consumption, their prices should be market determined at both the refinery gate and the retail level.
- An additional excise duty should be levied on diesel cars.
- A transparent and effective distribution system for PDS kerosene and domestic LPG should be ensured through UID.
- Price of kerosene and domestic LPG should be increased by Rs 6/litre and Rs 100 per cylinder respectively. The prices should be periodically revised based on growth in per capita agricultural GDP (for kerosene) and rising per capita income (LPG).
Reports suggest that a partial rollback of petrol prices might be considered soon.