As rupee tanks, fuel price hike inevitable

CNN-IBN | 23-May 12:13 PM

New Delhi: As the rupee continues its free fall, a hike in petrol, diesel and LPG prices is likely this week. The rupee fell to a record life low of 56 per dollar on Wednesday.

The rupee on Wednesday ended at a record closing of 56 per dollar versus 55.39 per dollar on Tuesday.

The Empowered Group of Ministers (EGoM) is likely to meet on a decision on fuel prices this week. Government sources have told CNN-IBN that the allies are being spoken to.

The Samajwadi Party is also being kept on board. Government sources also say that Mamata Banerjee will be told that a hike is unavoidable with the falling rupee.

Oil companies want a hike of at least Rs 4 per litre on petrol. But the government may agree for a lesser amount.

Earlier on Tuesday, Petroleum Minister S Jaipal Reddy had said that there was an immediate need to raise fuel prices, but refused to say when the hike will actually take place.

"It (price increase) is very essential but (before hiking rates) we have to talk to political parties," he told reporters here on way to Ashgabat for signing of the agreement for the Turkmenistan-Afghanistan-Pakistan-India pipeline.

The government had decontrolled petrol price in June 2010 but rates were last increased on November 4 last year. This despite oil price rising by 14 per cent and 7 per cent fall in value of rupee against the US dollar.

Price of diesel, kerosene and cooking gas were raised in June last year.

"If rupee depreciates by one against the US dollar, our oil companies lose Rs 8,000 crore (annually)," Reddy said.

State-owned oil firms, who had in the fiscal ending March 31, 2012 lost Rs 4,860 crore on petrol sales, are currently losing Rs 6.28 per litre on petrol.

(With additional information from PTI)

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