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Brace yourself for diesel price hike, cooking gas rates

Anupama Airy and Mahua Venkatesh, Hindustan Times  New Delhi, July 12, 2012
First Published: 15:07 IST(12/7/2012) | Last Updated: 13:37 IST(13/7/2012)

From your SUV to your kitchen, the going is likely to get harsher. While your wallet may have to shell out an additional Rs. 5 for a litre of diesel, an increase in cooking gas prices is also on the cards.


These developments, in turn, would hurt households by putting pressure on inflation — currently at 7.6%.

Diesel prices will be raised soon after the presidential elections on July 19, a senior official told Hindustan Times on the condition of anonymity. Though they refused to divulge details of the quantum of the hike, oil company sources said they were pressing for a hike of Rs. 5 a litre.

Though diesel prices were last increased barely a year ago — on June 25, 2011 — state-owned oil firms are currently selling the fuel at a loss of Rs. 10.33 a litre.

"A price increase is inevitable," an official said, "But date and time, nobody can say."

Sources said that Prime Minister Manmohan Singh, who is also overseeing the finance ministry, has already explained to the Congress party leadership that without the increase in prices, India would be further downgraded by rating agencies on account of its widening fiscal deficit.

The Congress-led UPA government has been talking about reducing fuel subsidies, and increasing the price of the heavily subsidised diesel and liquefied petroleum gas (LPG, used for cooking), for some time now. However, fear of a political backlash had held it back.

The government was forced to partially roll back a Rs. 7.54 hike in petrol prices on May 23, following widespread protests by Opposition parties as well as a UPA ally, the Mamata Banerjee-led Trinamool Congress.

"The government must increase the prices of diesel and LPG to plug the widening fiscal deficit," Federation of Indian Chambers of Commerce and Industry director and head (economics and research) Soumya Kanti Ghosh said.

"These reforms are critical for the country's economic health."

Diesel, which is widely used by agriculturists, trains and trucking companies, is 40% cheaper than petrol at Rs. 40.91 a litre.

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