LPG consumers hit for a six, diesel goes for a high five

Now get this straight: You’ll get a maximum three more gas cylinders at current prices till March 31, 2013 — no matter how many you have used up till now.

Still want more? Not to worry, you’ll get as much as you want. Only, you will have to pay around Rs 775 for every extra cylinder. To add to this, diesel prices have also been hiked by Rs 5 per litre, which will make your vegetables, fruits and a host of commodities, apart from bus and taxi travel, costlier.

In Mumbai, the price of diesel will be increased by Rs5 from midnight to 10am on Friday. After that, it will increase further taking in state taxes into account. The total hike could be as high as Rs7 per litre.

With its back to the wall, the UPA government made a move that spells good economics, but it’s very risky politically.

The repercussions were almost immediate, with the UPA’s allies crying hoarse, but prime minister (PM) Manmohan Singh is determined to set a collapsing economy right, top sources said.
While there is bound to be huge political costs, unless a rollback is carried out for the umpteenth time, the PM believes this signal will help draw foreign investors back to India.

The PM hopes, top sources told DNA, that if the economy picks up in the next two years with this “bold move” it will help the UPA recover from the shock he has given to the aam aadmi.

Thursday’s decision was taken by a Cabinet Committee on Political Affairs (CCPA) headed by the PM. In a concomitant move, the government has reduced the excise duty on petrol by Rs5.30 per litre, but its benefit will not reach the consumers as the oil marketing companies will use this rebate to cut their own losses.l
This, however, will offset some of the gains on the fiscal deficit front, analysts said.

The opposition parties, as always, issued statements opposing the government’s decision.

While Bhartiya Janta Party  leader Ananth Kumar said, “It will have cascading effect on inflation, it will have direct effect on common man, farmers and labourers.”

The Left party leader Brinda Karat said that the hike in diesel price will hit the common man.

Trinamool Congress leader, Mamata Banerjee once again disowned the decision of the government, saying her party was not consulted before taking the decision. However, her support to the government will continue.

Her party colleague and the Minister for Railways Mukul Roy was not kept in the loop about the decision even though he was the member of the CCPA, claimed Banerjee.

The Congress initially refused to comment on record, however a senior leader told DNA that the party was ready to face the public’s ire.

The last time the government had increased the price of diesel was on June 25, 2010.

The hike on diesel price and limiting the subsidised LPG cylinders will reduce the under-recoveries of oil marketing companies (OMCs) by Rs 20,300 crore. This will mean the government will save an equal amount of subsidy that has to be given to OMCs.