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Petro price hike evokes sharp criticism

Political parties, public organisations as well as industry associations all over the country sharply criticised the hike in the prices of petroleum products announced by the Centre, saying that it would hit the common man hard, besides having an inflationary impact over the economy.

The Bharatiya Janata Party, however, justified the increase in oil prices, saying the government had no alternative but to increase oil prices to reduce mounting oil pool deficit.

Talking to newspersons, party vice-president K Jana Krishnamoorthy said that the government had taken measures to lessen the burden of the increase in oil prices by reducing custom and excise duties on crude oil and transport fuel.

Top industry associations were sharply divided over the hike in petroleum prices effected by the government late Friday night with the CII saying the decision could adversely impact fiscal deficit and FICCI terming it a "mature decision".

"By reducing the import duty and excise, the government revenue will come down and this will have an adverse impact on the fiscal deficit of the country," CII president Arun Bharat Ram said.

He said the price hike was inevitable on account of rise in international oil prices but it should have been passed on to the consumers.

FICCI secretary-general Amit Mitra said government's decision to increase petro prices using a mix of measures indicates a "balanced" response and was a "mature" step.

The CII president said the government should have restored to a periodic hike in prices on a continuous basis from the early part of the year when the international oil prices started to increase.

"We, however, hope that the government will revise the price downwards once the international oil prices come down," he said.

Increase in oil prices affect the cash flows of oil companies adversely and leads to non-payment of user charges, he said adding that the CII had been time and again urging for user charges to be passed on to consumers.

The decision to undertake an increase in the oil prices is a difficult political decision but our worry is that the move to reduce excise and customs will affect fiscal deficit, he added.

Mitra said the government has taken a mature step and shown awareness that a steep hike in prices of petro products could have serious impact on prices.

Commenting on the government decision to reduce customs and excise duty on petrol and diesel Mitra said: It is a difficult decision for the government to reduce its revenue but the fact remains that a pure hike in prices of petro products could have destabilised the overall economy".

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