Ongoing 50 paise/month price hike to continue; Petroleum minister rules out ANY one-time steep increase.
The government is planning completely deregulate diesel prices within the next six months as it sees rupee rising against the dollar and international crude prices falling.
“In six months, diesel sector will be deregulated,” said Veerappa Moily, Union petroleum and natural gas minister, said.
This would mean a hike of around Rs 10 per litre in the price of fuel by May 2014.
The government is banking on the appreciation of the value of rupee to avoid any big hike in the price of diesel.
“We are already going in that direction. If the rupee appreciates and international oil prices drop, we will be in a position to completely deregulate,” said Moily.
He said the monthly increases in rates will continue as planned and there was no plan for a one-time steep hike of Rs 3 or Rs 4 per litre to bridge the gap. At current rates, it will take 19 months to wipe off all the losses on diesel sales.
The minister said he saw no hurdles in assembly elections in few states and ensuing general elections to the monthly revisions in rates. “Don’t worry. UPA-III will come back,” he said.
Last month the Kirit Parikh committee set up by the government had suggested that diesel price should be increased by Rs 5 immediately and by another 50 paise per month till the subsidy on the fuel gets neutralised.
While it was expected that the recommendations would not be implemented due to upcoming elections in the country, the move will result in a spike in the prices of commodities in the country.
Inflation as measured by the wholesale price index touched an 8-month high of 7% last month due to rise in the price of fuel and food articles. The hike in diesel price has a cascading effect on food articles in the country.
Total under-recoveries from diesel, kerosene and LPG cylinders for the first half of this fiscal stood at Rs 60,900 crore, with diesel subsidies accounting for Rs 28,300 crore.
While the finance ministry had allocated only Rs 65,000 crore for petroleum subsidies in fiscal 2014, the government will have to shell out more to compensate the oil marketing companies for selling fuel at a controlled rate.
While the government had deregulated the price of petrol in June 2010, it was looking to
freeing up diesel prices for some time.
In January this year the oil marketing companies were allowed to hike price of the fuel by up to 50 paise a litre every month as part of a plan to gradually remove the subsidies given on the fuel.
While the government was on course to neutralise its subsidy on diesel by December, the whole calculation went for a toss when the depreciation in the value of rupee took the subsidy per litre on diesel to close to Rs 14. With PTI
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