New Delhi, May 26 (DHNS): Braving public anger, threats of open protests by agitated allies and friends and the opposition moves for a nation-wide bundh next week, the UPA government on Friday ruled out the possibility of rolling back the biggest hike in petrol prices announced two days ago.
The oil marketing companies (OMCs) “are bleeding and desperate” due to high crude prices and the continuous decline in rupee in the past and the government had no other option but to go for the hike in a decontrolled regime, Petroleum Minister Jaipal Reddy told newsmen here on Friday.
Reddy, who rushed back to the capital from a visit to Central Asian Republic of Turkmenistan for consultations with Prime Minister Manmohan Singh and UPA chairperson Sonia Gandhi, justified the hike further, saying “the hike was necessitated due to double disaster of devaluation of rupee against the US dollar and increase in international oil prices.”
Defending the hike decision, he came down heavily on those opposing the move and said the country could not be run on populist sentiments alone, which was being seen as reference to threats by UPA allies the Trinamool Congress and DMK. The two allies said during the day that they would resort to agitation and even strike against the hike.
TMC chief and West Bengal Chief Minister Mamata Banerjee announced a protest march in Kolkata on Saturday, while the DMK gave a call for an agitation in Tamil Nadu for May 30.
Already, the opposition the BJP-led NDA, and the Left parties have announced an all India bundh on May 31 to protest against the hike. The BJP, which was holding its national executive meeting in Mumbai, continued to attack the government over the unprecedented quantum of hike. UPA's outside supporter Samajwadi Party too gave a call for a state-wide bundh in Uttar Pradesh on May 31.
While Reddy ruled out a roll back, chairman of the Indian Oil Corporation, the largest OMC, R S Butola, indicated during the day that his company could consider a downward revision of the price on June 1, if the price of imported crude eased over the next few days and the rupee regained its value against the dollar.
Butola argued that the OMCs had lost over Rs 2,400 crore over the last 50 days in the form of under-recoveries on petrol sales, in addition to under-recoveries of Rs 4,890 crore last year on the same account. As such OMCs were allowed to revise petrol prices on 1st and 16th of every month, depending on the average cost of crude imports during the preceding fortnight.
Surprisingly, they have not gone for fortnightly revision since mid-December, even while reporting under-recovery of Rs 7,290 crore on petrol sales since March, 2011.
On paper, the government had decontrolled petrol pricing in June, 2010 and since then the OMCs were not entitled to seek government subsidies on account of under-recoveries on retail petrol sales.
Although the crude prices have come down in the past fortnight and the rupee has also showed some correction on Friday, Reddy said that it was too” hasty” to arrive at a conclusion that retail prices can be reduced on the basis of a few days trends. "We are not able to take a definitive view because there is lot of volatility in the value of the rupee vis-à-vis the dollar and volatility in prices of crude oil, we have decided to watch the situation and we will come back to you in a few days" he added.