Calcutta, July 25: Petrol price has gone up by Rs 2.52 a litre and that of diesel by 92 paise in Calcutta from Tuesday midnight.
The new price of petrol in Calcutta is Rs 76.13 ' the highest in the country. Diesel costs Rs 44.66 a litre in the city after the increase.
However, domestic cooking gas price has been lowered by Rs 4 a cylinder. Kerosene is also cheaper by 6 paise.
The prices of petrol and diesel have gone up in seven states, including Bengal, while they have come down in 11 states. This is the first time since last June that diesel prices are being raised.
The price changes ' effective from Tuesday midnight ' were made public only on Wednesday afternoon, by when the new rates had been sprung on consumers.
The revisions, 24 hours after a petrol price rise of 87 paise in Calcutta, have provoked an angry outburst from chief minister Mamata Banerjee who had just returned from the ceremony in which Pranab Mukherjee was sworn in as President.
"I am really shocked. This is the central government's one-sided and suo motu decision. We will hit the streets to oppose the decision," she said. "If we always have to be worried about another round of fuel price hike, what's the point?" she asked.
The state-run oil companies issued a jargon-dripping statement (one cited "recalibration") that made little sense to lay persons. Neither were state government officials in charge of finance forthcoming.
The Telegraph tries to explain the complex reasons cited for unleashing an unfamiliar beast that bureaucrats feel must not be explained.
Why did the prices go up in Bengal?
Blame it on something called "irrecoverable" tax on petroleum products. A part of the tax that the state government collects from oil companies cannot be recovered from consumers or, in other words, cannot be added to the final selling price. This component is called "irrecoverable" tax.
The oil companies were partly compensated in a roundabout way through "a state surcharge". The Centre sets this surcharge and consumers pay it.
Then why did the oil companies raise prices now?
For petrol, the Centre used to allow the oil companies to charge 60 paise per litre as state surcharge. For diesel, it used to be 30 paise. The oil companies have been allowed by the Centre to charge from Tuesday midnight Rs 2.62 as "state-specific cost" (jargon for surcharge) for petrol and Re 1 for diesel. So, the oil companies raised the petrol price by Rs 2.02 (they were already charging 60 paise). To this Rs 2.02 hike was added the resultant extra sales tax of 50 paise. Thus the price of a litre of petrol went up by Rs 2.52 in Calcutta.
So, is the tax called "state surcharge" to blame?
Not exactly. The need for the "state surcharge" arose because the oil companies were not being allowed to pass on the irrecoverable tax component. This meant that the companies were losing around Rs 3 per litre of petrol.
Here's the break-up: the Bengal government charges 25 per cent sales tax and a Re 1 cess on petrol. The cumulative levy translates to around Rs 15 a litre. Or from the price you pay for every litre of petrol, around Rs 15 goes to the state government.
The "irrecoverable" tax is 20 per cent of the cumulative state levy in Bengal. This percentage is decided by the state government. After Wednesday's hike, the "irrecoverable" component adds up to around Rs 3 per litre.
It is this Rs 3 the oil companies have sought to recover through a hike called "state-specific cost". The decision on Wednesday to levy a "state-specific" cost of Rs 2.60 means the oil companies are still not recovering around 40 paise.
Why now?
The state surcharge, which the Centre sets for oil companies, has not been revised since 2003. However, in the past nine years, several states and the Centre have changed the taxes on petroleum products. Moreover, the crude oil prices have shot up in the intervening nine years.
In states that lowered the taxes, the "irrecoverable" component had also shrunk. Which is probably why the prices have gone down in 11 states.
What about Bengal?
The governments in Bengal neither raised nor reduced taxes on petrol and diesel. But with each successive petrol price hike, the "irrecoverable" component also went up. With the Centre now permitting the oil companies to charge a higher "state-specific cost" to lower the "irrecoverable" component, the prices of petrol and diesel have gone up in Bengal.
So, can we blame the Mamata government?
Not for this particular hike. The Mamata government has little to do with it. However, her government will be a beneficiary as it will get higher sales tax.
But questions can be raised on why the Mamata government is not reducing the state levies or the "irrecoverable" component ' which can bring relief to the consumer. The state government has cited the financial crisis for not doing so.
Why did the cooking gas price come down in Bengal?
Last year, after a price increase in cooking gas, the Mamata government had slashed value-added tax on the fuel. As a result, the "irrecoverable" component also came down. This probably is the reason behind the Rs 4 cut in LPG price in Bengal. In contrast, the LPG price in Assam has gone up by Rs 19.43 a cylinder.