Finance secretary Arvind Mayaram said on Thursday the government expected diesel prices to become market-linked soon, helped by a softening of global crude oil prices.
“The decision of the government which stands today is reduction in diesel subsidy by 50 paise per month which means increase in prices by 50 paise. So, the logical conclusion is that as and when that is over, it will become market driven,” Mayaram said at an event organised by industry body Assocham.
“We have been lucky on oil and if you see the oil prices which have been softening, I think that we will be able to exit the diesel subsidy soon enough and diesel is going to become market priced,” he said. Brent crude prices hovered around a 14-month low of $102 a barrel on Thursday. Despite the geopolitical tensions in Iraq and Syria, oil prices remained soft because of the ramped up shale gas production in the US and stepping up of output by Saudi Arabia.
The under-recoveries of oil marketing companies on the sale of diesel stood at R1.78 per litre as of August 19. The losses had dipped to an all-time low of R1.33 a litre in first half of August, bringing the prospect of diesel decontrol within sniffing distance.
Diesel prices are raised every month by up to 50 paise per litre to trim the losses. Rates have cumulatively risen by R11.24 a litre in 18 instalments since January 2013 when the UPA government had decided on small monthly hikes. Petrol price was deregulated in June 2010 and had moved more or less in tandem with the cost.
Mayaram said the gold import restrictions introduced last fiscal to bring down a bloated current deficit bill will be in place till the situation becomes 'comfortable'. “When you start earning more from other exports, then may be, we can import more gold. The 80:20 scheme has worked very well till now. I don’t think we need to look at this at this point of time,” he said.
The official reiterated his FY15 gross domestic product (GDP) growth target. “I am confident we will achieve growth of somewhere close to 5.8%. If we see the trend in growth, we will see there are green shoots of recovery in the economy,” he said. The Reserve Bank has projected the GDP growth for 2014-15 fiscal at 5.5% and the Economic Survey had pegged growth between 5.4-5.9%.