Thursday, 31 October 2013

Parikh panel recommends steep hike in diesel prices

An expert panel headed by former Planning Commission member Kirit S Parikh, which was constituted as Finance Ministry was looking to alter the way diesel and cooking fuels are priced to reduce the subsidy burden, has suggested that diesel prices should be hiked by a steep Rs 5 per litre, kerosene by Rs 4 a litre and cooking gas (LPG) rates by Rs 250 per cylinder immediately to cut fuel subsidy bill by Rs 72,000 crore.

In its other recommendations, the panel has suggested that the number of subsidised cooking gas cylinders supplied to households in a year should be cut to 6 bottles of 14.2-kg from the current quota of 9, while the panel has also suggested that after the diesel price hike, oil companies should be given a fixed subsidy of only Rs 6 per litre on diesel and any difference between cost of production and retail price should be passed on to consumers and going further the Rs 6 per litre subsidy on diesel should be liquidated in one year to make the fuel completely deregulated or free from price controls.

However, the expert panel favoured continuation of existing pricing principles for controlled petroleum products until diesel pricing is made market determined and said that ONGC and Oil India do not have unlimited capacity to share fuel subsidy burden and their contributions should be linked with crude oil prices from next financial year, while the Gail India do not get cheaper gas anymore, therefore, its contribution should not exceed the gross profit made on sale of liquefied petroleum gas.

Though, it is unlikely that the poll bound government will accept all the proposals of the panel but if implemented, the recommendation will reduce fuel subsidy by Rs 30,250 crore during the reminder period of the current fiscal from a projected Rs 138,435 crore.

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