Crude oil price hike to soar inflation further

The government signalled on Thursday to increase the crude-oil price by Rs 2-5 in next couple of days, as a measure to rescue Indian oil companies tottering under high pressure from world crude oil price scenario. A final decission would come in the next couple of days after Cabinet meeting.

Though the imminent hike is termed as a moderate but the government is eying an effect of Rs 4 to Rs 5 per litre hike in the price of petrol and Rs 2 to Rs 3 per litre in the price of diesel. Concurrently, the Centre plans to bring some kind of reduction in customs and excise duties on imports.

To augment revenues of state-owned oil companies, Petroleum Minister Murli Deora said: ‘the global fuel crisis has stepped up with crude oil price touching a US$135 per barrel, as a result Indian oil firms registered a revenue loss of Rs 225,000 crore for this fiscal by selling petroleum products below cost price’.

On Thursday, while briefing media on the present government objective Murli Deora is due to attain a several rounds of meeting with Finance Minister, Prime Minister and others before finalizing the number in increasing price for Petrol, Diesel and LPG. Under such circumstances, the inflation is expected to rise further causing a big jolt to the UPA government keeping in mind the political gamble; eying for coming general elections.

The petroleum ministry is looking for a combination of duty cuts and price hike of Rs 10 per litre of Petrol, Rs 5 per litre of diesel and Rs 50 per LPG cylinder. Now only after the Cabinet meeting, the ministry would come with the revised price, but it is certain that price is going to be increased, which is the second hike in last five months since the global oil price crossed the US$100 per barrel.

Inflation touches 8.1 pc

Meanwhile, as per the latest report the Finance Minister P. Chidambaram has expressed his concern as the inflation touched 8.1 percent. Describing it as “worrisome”, he said, “Government is ready to take more steps to reign in spiraling prices, however, he also assured that the impeding fuel price will though increase the inflation further but only for a short period.”

“The government is doing its best and ready to take more measures to contain price rise over time,” the finance minister added while addressing to reporters. In the meantime, the GDP growth rate has recorded at 9% in 2008-09 giving some satisfaction to Finance Minster.

Global Oil price slides

With the change of consumer behaviour due to the high price and the subsequent fall in energy demand in United States the crude oil trade has dropped to 126.13 dollars per barrel falling to 4.41 dollars to close at 126.62 dollars in New York trading Thursday.

Oil prices fell sharply, even though the Energy Department reported unexpected declines in crude oil supplies last week. A stronger dollar and concerns about gas demand also weighed on prices, the Associated Press reports.