Phased hike in diesel, LPG prices in the works
After capping the number of subsidised liquefied petroleum gas (LPG) cylinders and increasing diesel price by Rs 5 a litre in September, the government is likely to raise diesel and subsidised LPG prices, too, in a phased manner.
Having made a case for market-linked LPG pricing by selling 800,000 cylinders to household consumers at more than double the price, the government is expected to consider at the Cabinet Committee on Political Affairs (CCPA) meeting if the price could be revised and the increase cushioned through raising the six-cylinder cap on subsidised LPG.
With no major Assembly elections due until summer, the government has been pushing through some tough decisions before getting into election mode next year. Over the past six months, besides today’s railway fare hike, foreign direct investment in retail has been brought in, even at the cost of annoying allies.
| MOUNTING BURDEN Underrecovery of public sector oil marketing companies |
| Diesel Rs 9.0 per litre |
| PDS kerosene* Rs 30.6 per litre |
| Domestic LPG* Rs 490.5 a cylinder |
| *Additionally, a subsidy of Rs 0.82/litre on PDS Kerosene & Rs 22.58/cylinder on domestic LPG is provided by the government; underrecovery (eff. Jan 1, 2013) |
The CCPA is scheduled to meet tomorrow morning. Officials say the main issue on the agenda would be imposition of President’s Rule in Jharkhand. However, since fuel price revision is a sensitive issue, its inclusion at the last moment, like on several occasions before, cannot be ruled out.
The petroleum and natural gas ministry had worked out various scenarios and the impact those would have on the government’s subsidy burden, said a senior government official. Despite the September decisions, Indian Oil, Bharat Petroleum and Hindustan Petroleum, the three government-controlled oil marketing companies, have been incurring a daily revenue loss of Rs 389 crore on sale of diesel, LPG and kerosene at subsidised prices. But, with subsidised LPG cylinders still accounting for about 70 per cent of the one billion cylinders sold in the country, the ministry is looking at the option of raising the cap while increasing the price of subsidised LPG by over Rs 100. However, since a flat increase may be difficult, officials say a phased increase is being considered.
The cap on subsidised cylinders was expected to bring the revenue loss on LPG sale down by only about Rs 5,300 crore. But the move, coupled with the de-duplication drive being undertaken over the past few years, has helped control diversion. “After capping, the use of domestic LPG cylinders has flattened, while growth in commercial LPG cylinders has risen significantly,” Indian Oil Chairman R S Butola had earlier told Business Standard in an interview: “The principle of pricing a product at the market level will help, irrespective of whether subsidised LPG cylinders are capped at six or nine. The sheer notion of either having market price or having a limited amount of subsidy puts resources at the most optimal use.”