Sharpest hike in Petrol prices ever

The price of petrol has gone up by more than Rs 7.50 a litre across the country. The increase, the steepest-ever, came a day after Parliament’s Budget session ended and PM Manmohan Singh talked about the need for “difficult decisions”. After adding state taxes, petrol will cost Rs 73.18 a litre in Delhi, Rs 78.58 in Mumbai, Rs 77.88 in Kolkata and Rs 77.53 a litre in Chennai. This marks an increase of around 10% and puts a squeeze of roughly Rs 6,000 a year on a family that spends an average of Rs 5,000 per month on petrol. This is the first upward revision in petrol price since November 4, 2011. The highest increase till now had been Rs 5 per litre. State-run oil marketers twice raised prices by this amount—on May 15, 2011 and May 24, 2008 when the petrol price crossed the Rs 50 a litre mark for the first time. 
The decision immediately drew howls of protest and demands for rollback from parties across the political spectrum, including UPA allies such as Trinamool Congress chief Mamata Banerjee. But the West Bengal chief minister also made it clear that she would not rock the UPA boat. Consumers too voiced their anguish even as they thronged petrol pumps for a “cheaper” tank-up one last time. Police had to be called in to control the spiraling queues in many pumps in Delhi and elsewhere. 
The announcement of price revision came while oil minister S Jaipal Reddy is away in Turkmenistan to attend a ceremony for signing a four nation gas pipeline deal. Finance minister Pranab Mukherjee laid the onus of the hike on oil marketers. “The decision has been taken. Petrol is a deregulated commodity,” he said. 
The government seems to be testing the patience of the middle class. But the timing of the shocker of a raise, after seven-and-a-half months, seems political. The next political challenge, elections in BJP-ruled Gujarat and Himachal, are in November and the Congress is hoping the angst will die down by then or better still, the middle class will come to terms with the ‘new normal’ in petrol prices.
The sharp increase in petrol prices will have a marginal impact on inflation but any increase in diesel and cooking gas prices may hurt, experts said. Stubborn inflation for a sustained period has hurt the budget of households and fuelled anger against rising prices. After showing some signs of easing, inflation has once again started inching upwards, while food inflation has touched double digits. Soaring vegetable prices pushed inflation higher in April, while fuel and manufactured product prices sustained their pressure, posing a fresh policy challenge and announcing the return of price pressures in Asia’s third largest economy. Government data showed the annual rate of inflation, based on monthly wholesale price index, stood at 7.23% for April (over April 2011) compared to 6.89% for the previous month.