India govt decision to deregulate diesel is 'credit positive'-Moody's

Written by Reuters | Mumbai | Updated: Oct 21 2014, 21:27pm hrs
DieselIndia's decision to remove price controls on diesel and to raise natural gas prices signals fiscal discipline (Reuters)
India's decision to remove price controls on diesel and to raise natural gas prices signals fiscal discipline and is a "credit positive" step, although the overall impact could be limited, Moody's Investors Service said on Tuesday.

"The decision to fully deregulate diesel prices signals fiscal discipline on the part of the sovereign, which we view as credit positive," Moody's said in a note.

Still, Moody's also noted the fiscal savings for the government's diesel measures "are likely to be limited" given total subsidies account for less than 1 percent of the country's 2013/14 gross domestic product.

Moody's also noted that any future rise in diesel prices could contribute to food inflation by leading companies to charge more for freight transportation services or for the cost of fuel-intensive machines.