The government today decided to raise diesel prices by Rs 3 per litre and domestic LPG cylinder prices by Rs 50.Kerosene prices hiked by Rs 2 per litre. It scrapped import duty on petroleum products by 5%, Oil Minister S Jaipal Reddy said. Customs duty on diesel cut from 7.5% to 2.5%, he said.
The oil refining companies currently incur an under-recovery or revenue loss of Rs 13.72 on every litre of diesel, Rs 26.16 on every litre of kerosene and Rs 381 for every LPG cylinder.
The probability of another round of rate hike in July by RBI has increased substantially after this decision. High food inflation numbers published yesterday were already enough to suspect another rate hike to combat inflation. But this round of another fuel price hike would add to the inflation pressure and could compel RBI to increase rates by at least 25 bps if not 50 bps.
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