Even as diesel de-regulation faces hurdles, the industry body, Confederation of Indian Industry (CII), will ask the government to "bite the bullet" on dual-pricing of the fuel: One price for transportation purposes, another for farming.
A delegation of the CII will meet the prime minister, Manmohan Singh, next month and pitch for this, its director general, Chandrajit Banerjee, told Business Standard.
CII members will meet the prime minister during the India Inc meeting, slated for August, and later, Banerjee said.
The Chamber will suggest a slew of urgent reforms, needed to boost the economy, including privatisation of the coal sector and the fast-tracking of 50 large projects.
CII director general, Chandrajit Banerjee, told Business Standard it is important to bring the cost of diesel to the market price for transportation purposes. However, subsidy could still be given for farming, with better targeting.
“A mechanism for dual-pricing needs to be worked, but passenger cars, trucks, railways, in short the overall transportation sector does not require subsidy”, said Banerjee.
Banerjee said the government has to bite the dual-pricing bullet, else the fiscal balance will be in disarray. “Nowhere in the world is diesel subsidised. By subsidising, you distort the entire market”, he added.
Fuel subsidies have been pegged at Rs 43,000 crore in the Budget for this fiscal, against Rs 68,000 crore last fiscal.
Banerjee said passenger cars account for just three per cent of the total diesel subsidy.
He said subsidy is not required in other segments of the transportation sector, as it will pass on to the consumer.
CII deputy director, Marut Sen Gupta, said a higher diesel price for railways and trucks will fuel inflation, just a one-time cost.
“We are asking the price to go up in one go. It will be one-time inflation, after which all prices will get adjusted,” Sen Gupta said.
“The only people who need subsidy are the ones on the farm, who operate pumps and diesel generators”, Gupta added.
CII will also pitch for the private sector’s role in coal, as Coal India can’t handle it alone, Banerjee said.
“We are importing coal at a much higher price today. And we have coal. The linkages need to be cleared. This has been our concern”, added Banerjee.
According to the CII, allocating blocks is the main issue. The CII Economic Policy Council on Economic Revival has deliberated on these issues.
“We spoke in a meeting how to break the monopoly of Coal India in due time”, said the director general of CII.
It shortlisted fast-tracking of large projects, particularly 50 infra ones. “That’s a critical thing for us to kick-start growth and boost investor confidence”, said Banerjee.
CII will also discuss with the Prime Minister the issue of disinvestment upfront. “If you take so much disinvestment in one go, the market will not be able to absorb it”, said Banerjee. In the current situation, if you wait for the market to recover, there isn’t a starting point. It starts declining further, he added.
The Cabinet has cleared disinvestment of Rashtriya Ispat Nigam and Steel Authority of India Ltd (SAIL), but so far none has been executed. The government has set a target of Rs 30,000 crore for disinvestment this fiscal.
To boost agriculture, CII recommended delisting perishables from Agriculture Produce Market Committees (APMC) Act and for the uniform implementation of APMC Act in states, allowing for direct lifting of foodgrains for organised retailers, as also appropriate mechanisms and price monitoring.