Monday, 14 July 2014

Diesel price deregulation likely by December if global price trend stays

Diesel prices may be deregulated as early as December if the current trend in global prices continues, while the number of subsidised cylinders supplied to households may be cut again as the government strives to cut fuel subsidies and achieve the fiscal discipline targeted by the finance minister. 

Brent crude oil, which had soared above $115 last month due to the crisis in Iraq, has fallen to $106.7 as fears of supply disruption receded. Prospects of higher supply from Libya has also dampened prices. This is expected to reduce the gap between India's diesel price and the international price. The gap had fallen to Rs 1.6 a litre but rose to Rs 3.4 last month. 

Diesel is a major drag on the public exchequer as state oil firms incurred a revenue loss of Rs 62,837 crore in the previous fiscal year. 

The government also plans to cut cooking gas subsidies with steps such as checking its diversion and reducing the number of subsidised cylinders. On an average each household consumes 7.2 cylinder a year but they can buy 12 if they need. 


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