- No objection to govt's proposal to raise LPG cap: Election CommissionDiesel price hike coming soon as govt clears deregulation, raises LPG cylinder quota to 9 from 6Won't factor diesel price hike in oil subsidy bill in FY'13: ChidmabaramOil shares gain up to 6.6%, Indian Oil Corporation, Hindustan Petroleum lead
In a bold reforms decision, the government today partially deregulated diesel price allowing a hike of 40-50 paise a litre per month for retail customers and nearly Rs 11 for bulk consumers, a step that is feared will have a cascading effect on inflation.
In a bid to sweeten the bitter pill, the Cabinet Committee on Political Affairs chaired by Prime Minister Manmohan Singh today raised the quota on subsidised LPG to nine cylinders per household from six, bowing to public pressure.
State-owned oil companies in a parallel move will cut petrol price by 25 paise per litre in view of softening in cost of raw material.
The decision on diesel is expected to cut the subsidy bill by Rs 12,900 crore on account of hike in price of fuel sold to bulk consumers like Railways and state transport undertakings. Diesel accounts for 59 per cent of the estimated Rs 160,000 crore fuel subsidy bill in 2012-13.
An order issued by the Oil Ministry post CCPA decision stated that bulk users be charged market price, that will result in a hike of Rs 10.81 per litre over and above the current rate of Rs 47.15 in Delhi. The government is expected to save about Rs 9,000 crore of raise in price for retail buyers.
"We have given some liberty to oil marketing companies to raise diesel prices in small dozes. They are authorised to make small price correction from time to time," Oil Minister M Veerappa Moily said.
"They should exercise this discretion in such a manner that inflation is not impacted. Also, the entire burden is not put on consumers." Asked what small meant, he said "small means small."
Finance Minister P Chidambaram maintained that the oil companies have been allowed to make "small correction from time to time."
"I am not factoring in at this moment (the price rise). I am proceeding on the basis that the subsidy bill remains the same (as earlier)," he said.
Opposition parties and allies like Samajwadi Party slammed the government's decision on diesel calling it deregulation. Demanding a rollback, they said the decision to allow periodic hike in diesel prices would have an alround spiralling effect on commodity prices and transportation cost.
They were not impressed by the decision to raise the cap on LPG cylinder calling it is a political gimmicks.
Price of diesel, which was last revised on September 14 when it was hiked by a steep Rs 5.63 per