In the highest ever price raise, the government on Wednesday announced a Rs 5 a litre increase in petrol, Rs 3 on diesel and Rs 50 per LPG cylinder together with customs and excise duty cuts to combat spurt in global oil prices.
The hike announced by the UPA government, with less than a year to go for general elections, was met with opposition from its Left allies who announced a countrywide stir.
"We were left with no option," Petroleum Minister Murli Deora told a packed news conference after a meeting of the Cabinet Committee on Political Affairs that arrived at the decision.
State-run Indian Oil, Bharat Petroleum and Hindustan Petroleum would have suffered a revenue loss of Rs 245,305 crore this fiscal without these measures, he said. "Due to the relentless increase in international oil prices, it has now become necessary for the consumer... to shoulder a small part of the increased burden, through a marginal hike in prices."
Petrol and diesel prices were last raised in February and the new prices will come into effect from midnight tonight.
Crude prices, however, were trading at $ 124.01 a barrel in New York on Wednesday, down $ 11 from its May 22 peak of over $ 135 a barrel.
The government also announced an across the board 5 per cent cut in customs duties, bringing rates on crude to zero, on petrol and diesel to 2.5 per cent and on other products like ATF and naphtha for non-fertilizer use to 5 per cent.
Besides, excise duty on petrol has been cut by Re 1 a litre to Rs 13.45 and on diesel to Rs 3.60.