retail outlets to take advantage of the significant gap between the price of bulk and retail diesel.
This naturally negated the benefit of dual pricing.
The defence department and railways are compelled to buy diesel at market rates, but the central government funds their expenses.
Sources say the oil ministry has been under pressure from OMCs and state governments to revert to subsidised prices to STUs. Apart from STUs, even some industries like construction and steel have shifted to retail purchases, according to a November report of the PPAC.
Between April and November 2013, India consumed about 45.26 million tonnes (mt) of diesel compared to 45.58 mt during the same period in the previous year. Sources say that all STUs have now started procuring diesel from retail outlets, with the Kerala State Road Transport Corporation (KSRTC) being the last STU to shift to retail purchases.
Earlier this year, the Kerala government had moved the high court, seeking a directive to all oil companies to supply diesel to KSRTC at subsidised rates, considering that it is a public utility. The court had upheld government’s view and asked oil companies to continue to provide KSRTC subsidised diesel. But in September, the Supreme Court set aside the high court ruling.
Subsidy on each (subsidised) LPG cylinder is Rs 414 at present, while the market price is Rs 1,021.