GLOBAL OIL SHOCK HITS HOME: Petrol up Rs 5, diesel Rs 3, LPG 50; unpopular but we had no choice, says PM, calls for official austerity Aware that it would very well be the last price hike that his government could afford before the election frenzy sets in, Prime Minister Manmohan Singh today came out of the clutches of Left allies, approving the maximum proposed increase in consumer prices to provide much-delayed succour to state-run oil marketing companies which have been losing money as global prices of crude oil head north. The government announced the largest-ever price increase of Rs 5 per litre on petrol, Rs 3 on diesel and Rs 50 per cylinder of cooking gas LPG while keeping kerosene, the poor man's lighting and cooking fuel, untouched. "I know that the price increases we have had to announce today will not be popular, even though they are only modest,' Singh told the nation in a televised address to explain the conditions under which his government was forced to revise the prices. The Prime Minister has also written to all Cabinet ministers and state governments to bring down expenditure incurred on official vehicles. He asked them to avoid wasteful usage, cut down on foreign travel and expenditure and adopt all possible austerity measures to keep overall government expenses low. As Left-ruled West Bengal announced a cut in sales tax on petrol and diesel to cushion the hike, the Congress too asked state governments to take measures like duty cuts. But the Congress did not agree with demands for a rollback, saying such a step would not be in national interest. The Left has called for nationwide protests over the hike. In his address, Singh said the price hike was "bare minimum with a substantial burden being borne by the government and the oil companies'. "There are limits to which we can keep consumer prices unaffected by the rising import costs. Our oil companies cannot go on incurring losses. This way they will have no money to import crude oil from abroad,' he said. The OMCs would have lost Rs 245,305 crore during the current fiscal year for selling these fuels below costs but for the price rise, duty cuts and other measures that were decided at a meeting of the Cabinet Committee on Political Affairs. The government took a hit on its revenue by cutting customs duty on all products by 5 per cent, abolishing that on crude oil and lowering rates on petrol and diesel to 2.5 per cent. It also cut the excise duty on petrol and diesel by Re a litre to Rs 13.45 and Rs 3.60 per litre respectively. While the increase in retail prices would bring in Rs 21,153 crore for the OMCs, the duty cuts would reduce their tax outgo by Rs 22,660 crore. Other support measures to offset the OMCs likely burden is a higher payout by state-run upstream oil and gas producers Oil & Natural Gas Corp and Oil India Ltd who would shell out Rs 45,000 crore this year as crude oil discounts to OMCs that also double up as refiners. Last fiscal, they paid Rs 25,708 crore. With the OMCs having to absorb Rs 20,000 crore of the loss as against Rs 16,125 crore last year, the leftover loss of Rs 135,000 crore would be handled by the government with the Finance Ministry issuing oil bonds every quarter based on actual numbers. However, to provide immediate liquidity to OMCs, the government would allow them to daily place Rs 1,000 crore of previous oil bonds with the central Reserve Bank of India in lieu of foreign exchange to import crude oil. Without these efforts, the OMCs would have required a price hike of Rs 21.43 a litre on petrol, Rs 31.58 on diesel, Rs 35.98 on kerosene and Rs 352.99 on an LPG cylinder. Petroleum Secretary M S Srinivasan claimed that the moderated price hike would have an inflationary impact of 0.5-0.6 per cent on general prices. The inflation rate is already at a 45-month high of 8.1 per cent. Though denied by Petroleum Minister Murli Deora, a proposal to limit supply of subsidised LPG to each consumer at eight cooking gas cylinders per annum was overruled at the CCPA on grounds that it would be difficult to implement and could raise negative publicity for the government. Another proposal to allow a monthly change in prices depending on international levels was also turned down in favour of the one-shot increase, sources said. However, the PM today formed a committee under former Petroleum Secretary B K Chaturvedi, now a member of Planning Commission, to examine the financial status of oil firms in light of the global price rise since 2004; to examine the reported and the real deficit claimed as "under recoveries'; and, to examine the available options for burden sharing by all stakeholders. The PM has also asked the states to chip in their contribution in the national effort to contain the global oil shock. "The Central government, oil companies and consumers are bearing a part of this immense burden. It is, therefore, incumbent on state governments, many of whom tax petroleum products substantially, to also contribute to this national effort by suitably reducing state taxes and levies,' he said. With the Indo-US nuclear deal in limbo because of opposition by the Left allies, Singh also used his national address to garner support for the nuclear energy route. "We cannot remain captive to uncertain markets and unsure sources of supply. We have to develop renewable sources of energy, including nuclear energy,' he said. The steep price rise is also an indicator of PM's desire that people should start conserving energy. "We need to learn to adjust to this new international scenario. We need to be efficient and economical in our use of energy... To begin with, each one of us can conserve energy and contribute to national security,' he said. Delhi Petrol 50.56 (after ST cut) Diesel 34.80 (after ST cut) LPG 344.75 Mumbai Petrol 55.88* (after ST cut) Diesel 39.54 (after ST cut) LPG 348.00 Kolkata Petrol 52.20 (after ST cut) Diesel 35.81 (after ST cut) LPG 350.50 Chennai Petrol 55.07* (after ST cut) Diesel 37.73 (after ST cut) LPG 338.10 * Do not reflect tax cuts after announcemen