Fuel prices raised

The impact of fighting in Iraq has finally hit India, with state-run fuel retailers raising petrol price by Rs.1.69 a litre and diesel by 50 paise per litre, both excluding local taxes, to pass on the burden of rising global oil prices.
This is the first increase in petrol price and second hike for diesel under the Narendra Modi government.
The new prices would come into effect from Tuesday and would be more -Rs.2 for petrol and 56 paise for diesel -at petrol pumps due to incremental increase in state taxes.
The increase signals the government's intent to stay the course on reforms despite worries over inflation, especially on petrol, which is deregulated and has just 1% weightage in the wholesale price index. But diesel has a weightage on 4.6% in the inflation index and is the main transportation fuel. The gap between government-capped retail price and production cost has widened to Rs.3.40 from Rs.2.80 at the end of May.
Since India imports roughly 70% of its oil needs, it remains vulnerable to global price fluctuations. In the backdrop of Iraq's shadow, the government is not inclined to hurry up diesel deregulation. Instead, the thinking is to allow global oil prices to get over the Iraq jitters and let the small dose of monthly increase, along with gains in exchange rate, to catch up with market rate.
Till the end of May , global oil prices had been holding steady around $107 a barrel. Had the rupee exchange rate strengthened to about 57 to a dollar, it would have wiped out the under-recovery .
But the violence unleashed by Jihadist in Iraq sent shock waves through the global oil market and has pushed up price of Indian crude purchases to $110 a barrel. Simultaneously , IndianOil said the rupee exchange rate too has deteriorated and global price of petrol risen by $4 a barrel.
Diesel price has gone up 17 times since the UPA government decided in January 2013 to raise in small doses every month.
Besides diesel, fuel retailers are losing Rs.33 a litre on kerosene sold through ration shops and Rs.449 on each subsidized cooking gas cylinder.
At current rates, under-recovery on diesel and kitchen fuel is pegged at Rs.107,850 crore this fiscal.