The union government today decided to lift price control on petrol and allow an increase of Rs3.50 per litre of petrol. The empowered group of ministers (EGoM) also approved a hike of Rs2 per litre of diesel and Rs35 per cylinder of LGP.
The EGoM is also reported to have approved a hike of Rs3 per litre of kerosene supplied through the public distribution system (PDS) to the economically-weaker sections.
The EGoM, headed by finance minister Pranab Mukherjee, today decided to opt for a market-driven increase in the prices of petrol and diesel as the pressure to cut budget deficit outweighed concerns of the political fallout the measures.
While diesel prices have been hiked by Rs2 a litre, its prices would be taken out of the administrative price mechanism (APM) at a later date.
Fuel prices in the country, which have so far been regulated by the government under the APM, in order to ease the burden on the common man, will now be linked to the market price of the crude oil in the international market.
With this decision, any fluctuation in the international prices of crude oil would directly reflect in the fuel prices in the domestic market.