Diesel hikes 'will continue' despite poll setbacks

Seeking to quell speculation that recent poll setbacks due to perceived runaway inflation may lead to policy rollback, oil and gas minister M Veerappa Moily said on Friday that state-backed oil marketing companies or OMCs will continue the monthly 50 paise/litre diesel price hikes.

“We do not act on panic. If the country has to go forward, reform is a must. So the reforms will continue. We have to pay for diesel and petrol to the international market, otherwise they will not supply to us.”

The OMCs use the hikes to offset their under-recoveries due to fuel being sold at government-set subsidised prices. They incur a loss of Rs 9.90/litre on diesel.

Moily hardline approach resonates with finance minister P Chidambaram’s.

He nevertheless hinted that the government may take a softer stand on the Kirit Parikh panel recommendations in October that diesel prices be hiked immediately by Rs 5/litre and LPG’s by Rs 250/cylinder.

This means, there may not be a one-time hike in prices of diesel and LPG.

“Economically, that (the panel’s view) is the right decision. But how practical it is, and how it can be  applied… one has to take a view on it. The recommendations will help restore fiscal balance.
But the issue is whether the government can implement what has been recommended… because we need to strike a balance between the consumer (interest) and government revenues.
A balanced view will be taken on the report,” Moily said.

He also said he would ask states to lower the value added tax or VAT on petroleum products.

He said the Cabinet Committee on Investments (CCI) cleared five oil and gas projects worth Rs 7,947 crore on December 9, including state-backed explorer Oil and Natural Gas Corp’s Rs 2,379 crore project for refurbishing surface installations and pipelines, and the Gujarat State Petroleum Corporation’s Rs 5,200 crore liquefied natural gas or LNG terminal project at Mundra.