Decision on diesel, LPG price reform unlikely soon

Reforms in diesel and cooking gas prices might have to wait longer, with the government yet to arrive at a consensus with its political allies on the contentious issue.

The government is keen to take all allies on board, having faced strong opposition from the TMC and DMK constituents of the ruling coalition on the recent petrol price rise.

Prices of diesel, domestic LPG and kerosene were last increased in June 2011. A top ministry official said it wanted a price increase but ‘no politician was convinced’. “We will have to do a consensus building exercise,” he said.

No raising of rates would be possible before the Vice President's election on August 7, he added.

Then, the monsoon session of Parliament begins on August 8 and the government would find it tough to take a decision during the session.

“The most important reform is not allowing FDI (foreign direct investment) in (the) retail (sector), but cutting subsidies on diesel, LPG and kerosene,” the official said.

The subsidy on these three products could be Rs 1,60,000 crore this financial year, against Rs 1,38,500 crore last year. Of this, the government might have to shoulder around Rs 96,000 crore if no price rise is done.

The oil marketing companies — Indian Oil, Bharat Petroleum and Hindustan Petroleum — currently sell diesel at a loss of Rs 9.95 a litre, while they lose Rs 319 on sale of every 14.2-kg LPG cylinder for domestic consumption. Besides, they lose Rs 27.20 per litre on kerosene.

A ministerial panel authorised to decide on pricing of the three fuels has not been reconstituted after its previous head, Pranab Mukherjee, resigned as finance minister to get elected as the President of India. The petroleum ministry is contemplating sending a price rise proposal to the Cabinet Committee on Economic Affairs and leaving the decision to the Prime Minister, said the official.