Although in favour of permitting partial deregulation of petrol and diesel pricing, Prime Minister Manmohan Singh today went with the Congress party decision to keep retail prices under check with the increase in petrol limited to Rs 4 per litre and diesel, Rs 2 per litre.

One Petroleum Ministry proposal was to allow state-run oil marketing companies (OMCs) to fix prices of both products when crude oil rates were below $75 a barrel. The government would intervene at crude above $75, using the current burden-sharing scheme between consumers, the government, upstream oil and gas companies as well as OMCs.

Under this limited decontrol, the required raise would have been Rs 5.82 per litre on petrol and Rs 3.62 a litre on diesel. The decision to increase the price was taken today after Congress party president Sonia Gandhi conveyed her view, sources said. Petroleum Minister Murli Deora had written to senior party functionaries yesterday giving reasons for the price increase and the options available.

“The hike was necessitated because international crude oil prices have doubled to $70 a barrel since December,” Deora said. The OMCs’ losses on fuel sale have risen from Rs 130 crore to Rs 170 crore per day.

The increase, effective from midnight tonight, does not touch kerosene or domestic LPG cylinders. The three OMCs lose Rs 92.96 on sale of a 14.2-kg LPG cylinder and Rs 15.26 on every litre of kerosene amounting to over Rs 30,000 crore for fiscal 2009-10. Sources said the government might levy Customs duty on crude oil to make up for losses on domestic LPG and kerosene.

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