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12-cylinder carrot to lure support for fuel price hike

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SummaryIn a bid to neutralise political opposition to planned fuel price hikes, the government is considering a two-step process: First, allow up to 12 subsidised domestic gas cylinders per year from the currently proposed nine and later, raise prices of LPG and diesel in a phased manner.

companies currently sell diesel at a loss of R10.16 per litre, kerosene at R32.17 a litre and LPG at R490.50 per 14.2-kg cylinder.

Separately, as reported by FE, the petroleum ministry is set to ask the bulk consumers of diesel to buy it at market rates. Currently, bulk consumers — power plants based on diesel, companies with captive power units, the railways and road transport corporations — buy the fuel at subsidised rates but at slightly lower rates than the retail consumer, thanks to a waiver of dealers’ commission and discounts offered by the oil companies, which compete to get the tenders.

Bulk users account for more than a fifth of the diesel consumed in the country at present. Indian Railways accounts for around a quarter of bulk diesel consumption.

According to ministry data, the under-recovery on diesel between April and September was R52,700 crore, while it is estimated that by the end of this fiscal it would be around R98,400 crore.

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