Partial diesel decontrol likely for bulk users
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.
According to oil industry executives, the subsidy bill on diesel would come down by around 18% if the ministry’s proposal is implemented. Some economists, however, warned that the move could be inflationary. Since more than two-thirds of the trains in the country use diesel-fired locomotives (Indian Railways accounts for around 5% of bulk diesel consumption), the move could revive demands for introducing a fuel component in freight if not passenger fares that would fluctuate with the price of diesel.
Bulk users account for more than a fifth of the diesel consumed in the country at present: India consumed 88 million tonnes of diesel in 2011-12 and 64 million tonnes up to November this fiscal.
A petroleum ministry official told FE on condition of anonymity: “We are working on a proposal to reduce the subsidy by restricting subsidised sales for bulk consumers.”
“At current prices, the savings in undercoveries would be R12,907