Piped cooking gas, CNG prices hiked; diesel rate cut: 10 things to know

Written by FE Online | Updated: Oct 19 2014, 19:47pm hrs
DieselThe diesel price stands deregulated to allow it to move as per market conditions, just like petrol. Reuters
Prime Minister Narendra Modi on Saturday took bold steps to free the economy from the clutches of fuel subsidy by deregulating diesel and formalising the price formula for natural gas.

1. The diesel price stands deregulated to allow it to move as per market conditions, just like petrol.

2. There will be an immediate respite of about Rs 3.50 per litre on pump price given the considerable reduction in international crude oil prices.

3. Diesel price cut first since January 2009. Over the last five years, prices of diesel has significantly gone up.

4. Diesel price deregulation eases the governments huge subsidy burden paid out of the budget. A fall in global oil prices, down more than 20 per cent from this year's June high, means that ending costly diesel subsidies will save the government money without hurting consumers.

5. Diesel deregulation will significantly reduce subsidy payouts by Oil and Natural Gas Corp, GAIL (India) Ltd and Oil India Ltd. In the first quarter of this fiscal (April-June 2014), the under-recovery burden on oil marketing companies was Rs 9,037 crore

6. The move to market-based pricing will boost the role of private players like Reliance Industries and Essar Oil in India's retail arena.

7. Petrol and diesel prices were deregulated in April 2002 when the NDA government led by Atal Bihari Vajpayee was in power. But administered pricing regime made a back-door entry in 2004 with UPA Petroleum Minister Mani Shankar Aiyar pushing for control on diesel, LPG and kerosene prices.

8. Government tweaked the UPA-approved gas pricing formula to raise gas prices by about a third to $5.61 per million British thermal units rather than double what the UPA approved formula would have resulted in.

9. The previous government had suggested raising domestic gas prices to $8.4 per mmBtu from the current $4.20 per mmBtu.

10. Natural gas price increase will result in CNG prices going up by Rs 4.25 per kg and piped cooking gas by Rs 2.6.