Updated on Thursday, July 02, 2009, 14:47 IST

New Delhi, July 02: Government on Thursday rejected demands for a roll back in the hike in petrol and diesel prices, saying it would favourably consider the issue only when global crude prices come down.

"We will respond suitably in case there is a fall in the international crude prices," Petroleum Minister Murli Deora said in the Lok Sabha.

His response came to demands from the Opposition as also two allies of the ruling UPA, DMK and Trinamool Congress, for withdrawal of the price hike effected from midnight.

Deora also left it to the state governments to reduce sales tax imposed by them on petroleum products.

When the price of the Indian basket of crude products had declined from USD 142 to USD 40 in December last year, "the government responded by reducing the petrol price by Rs ten and diesel price by Rs four in two stages in two months," Deora said.

But now the crude prices have once again risen to USD 70 or a "75 percent hike since December", he said adding that this had resulted in the oil manufacturing companies reporting under-recoveries of Rs 70,200 crore.

The Minister said the huge under-recoveries by the OMCs had adversely affected their liquidity position.

"In view of the continuous rise in global crude prices, ... a marginal increase had become unavoidable," he said. Keeping in mind the interests of the 'aam aadmi' (common man), Deora said the petrol price was increased by "only Rs four" against Rs 6.9 as desired and diesel prices by only Rs two as against Rs 4.11.

He said the retail prices of PDS kerosene and LPG were not increased by the government for which the projected subsidy burden amounted to Rs 30,000 crore.

Bureau Report