Diesel price to rise 50p/month; LPG cylinder cap set at 9/year

Jan 18 2013, 01:02 IST
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M Veerappa Moily, Petroleum minister M Veerappa Moily, Petroleum minister
SummaryThe government on Thursday allowed state-run oil marketers to raise diesel prices in “small quantities” over several months till their under-recoveries on sale of the fuel are eliminated, but raised the cap on subsidised LPG cylinders to 9.

the sale of diesel, kerosene and domestic LPG. Cutting these subsidies (compensation for these losses) is crucial for the Centre’s fiscal consolidation road map and avoiding a downgrade of India’s sovereign credit rating to junk status.

The CCPA raised the annual ceiling on subsidised LPG cylinders to 9 (from previous 6) effective next fiscal and raised the entitlement for this year to 8. Subsidised LPG costs Rs 410.50 per 14.2-kg cylinder and any household requirement beyond the new limit of 9 cylinders will cost a near market price of Rs 895.50 per bottle. Finance minister P Chidambaram said oil companies have been allowed to make “small correction... I am looking at the same subsidy bill as was expected earlier.”

“Given the experience faced by OMCs on account of petrol and on LPG, we have a difficult situation in hand. We have not seen the notification. If the government has decontrolled diesel, there will be no question of subsidy either,” said Deloitte senior director oil and gas Kalpana Jain. The price of diesel was last revised on September 14 when it was hiked by a steep Rs 5.63 per litre. At present, diesel costs Rs 47.15 per litre in Delhi.

Even petroleum secretary GC Chaturvedi was not willing to term the decision deregulation. He said: “If we are to deregulate, then diesel price will have to be raised by Rs 9.60 per litre, which is not the case.”

Essar Oil MD and CEO LK Gupta said: “Private oil marketing companies have invested substantially in setting up retail outlets, but due to lack of level playing fields, these assets were underutilised. Once price parity is reached between retail and market prices, it will not only benefit consumers by providing them choice, but also help in demand management of diesel.”

As FE reported earlier, the petroleum ministry is also considering asking bulk consumers of diesel to buy 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 oil companies which compete to get the tenders. The subsidy bill on diesel would come down by around 18%

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