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Business News/ Politics / News/  Govt approved diesel price decontrol ‘in principle’ in 2010
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Govt approved diesel price decontrol ‘in principle’ in 2010

Govt approved diesel price decontrol ‘in principle’ in 2010

By BloombergPremium

By Bloomberg

New Delhi: The government on Tuesday said that it had taken an “in principle" decision in 2010 to deregulate the price of diesel but that it hadn’t done so as it wanted to insulate consumers from higher prices. The opposition said the statement indicated that diesel prices may soon be increased.

By Bloomberg

On 25 June 2010, the government had decided to make the price of diesel market-driven, both at the refinery gate and at the retail level. The government had freed the retail price of petrol on the same day.

The government’s “in principle" decision was taken on the basis of recommendations made by a panel on the subject under the chairmanship of former Planning Commission member Kirit S. Parikh in 2010.

Parikh had recommended that the government should deregulate the price of diesel with immediate effect.

Despite rising global crude prices, India hasn’t raised diesel prices since July last year.

The opposition Bharatiya Janata Party (BJP) said the reply indicated that the government may raise diesel prices. The government is “saying that they are doing it in principle and they will modulate it to the needs of the people," BJP spokesman Prakash Javadekar told reporters in Delhi. “But this means that they are going to increase diesel prices and the diesel shock is coming in few days from now."

As per the latest government data, state-run oil marketing companies (OMCs) are incurring an under-recovery of 14.29 per litre on diesel, 31.04 per litre on kerosene sold via PDS and 570.5 for every 14.2kg cylinder of cooking gas.

The state-run oil-marketing companies (OMCs) lost 80,000 crore in the year ended 31 March for selling diesel below cost. Government figures show that in 2011-12, OMCs had estimated under-recoveries to the tune of 1,38,406 crore.

Petrol prices, which were removed from state control in June 2010, have not been increased since December.

On 16 April, Mint reported that Parikh had again been asked to suggest ways in which the price of diesel can be raised to check the mounting fuel subsidy. He is likely to submit his report to the government within two months.

In response to another question, Singh said the OMCs had said that unless the prevailing under-recoveries are not adequately compensated, they may have problems purchasing crude oil from the international market.

Singh said the oil ministry had asked the finance ministry to levy additional excise duty on diesel cars and to abolish a 5% import duty on imported natural gas before the budget. These proposals did not feature in the budget.

aman.m@livemint.com

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Published: 24 Apr 2012, 11:44 PM IST
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