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Petrol, diesel prices up

By Sushma Ramachandran

NEW DELHI JUNE 3. The Government today announced a price rise of about Rs. 2.50 a litre of petrol and Rs. 1.50 a litre of diesel while reducing the excise duties by two per cent on the products. Simultaneously, a mechanism has been set in place for regular fortnightly revision of prices by the oil companies along with a quarterly review of excise duties by the Government to check "excessive volatility''. This mechanism was aimed at protecting the domestic consumers from the volatility of the international markets.

The hike which comes into effect midnight tonight brings the rates in Delhi to Rs. 28.94 a litre for petrol and Rs. Rs. 17.99 a litre for diesel. In Chennai, the petrol price will be Rs. 31.05 a litre and diesel price will be Rs. 19.63 a litre.

The Petroleum Minister, Ram Naik, said the increase was meant to offset the financial burden being faced by the oil companies due to the $ 5 a barrel rise in the world crude oil prices since February. The burden of Rs. 2000 crores in April and May was borne after the formal dismantling of the administered pricing mechanism (APM). The companies have been advised not to raise the prices for three months after the APM withdrawal.

As the companies had agreed to this discipline despite the fiscal strain, he said, the Finance Ministry has decided to compensate the oil companies. This could be in the form of cash or bonds, but these modalities were yet to be worked out.

Mr. Naik described the recent hardening of world prices as excess volatility. The prices rose by 25 per cent from $ 20 to $ 25 a barrel of crude oil over a three-month period.

The two per cent cut in excise duties meant that the duty on diesel falls from 16 to 14 per cent and on petrol from 32 to 30 per cent. This was a "revenue neutral'' decision as the revenue collections had risen substantially due to the higher oil prices.

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