Get ready for more price battles. The monthly hikes in diesel prices may double to Rs. 1 a litre from the current 50 paise. Along with this may come a monthly hike in the price of cooking gas (LPG), in the range of Rs. 5 to Rs. 10 per cylinder.
While the government is not in favour of implementing the hefty fuel price hikes recommended by the Kirit Parikh expert panel, it wants to reduce the fuel subsidy bill, and may stick to monthly price hikes to push this through in a more phased out manner.
“There are two proposals under consideration...which is to go in for a fortnightly hike of 50 paise a litre for diesel or a Rs. 1 per litre monthly hike,” a senior bureaucrat in the petroleum ministry said.
While petroleum minister M Veerappa Moily refused any immediate comments, he said the government is not considering any steep hike in fuel prices and may stick to the monthly hike in diesel prices.
Present losses on diesel stand close to Rs. 11 a litre and that of Rs. 555 per LPG cylinder.
“Hiking fuel prices in small doses is necessary given the huge subsidy burden at over `90,000 crore, which is coming in the way of controlling the widening fiscal deficit,” a senior official said.
With elections in five states — Delhi, Rajasthan, Madhya Pradesh, Chhattisgarh and Mizoram — the government is wary of the political fallout if it goes in for a large hike in fuel prices, sources said.
While the ongoing gradual diesel price hike, and the capping of subsidised LPG cylinders at 9 a year, were expected to bring down fuel subsidies considerably this year, the sharp fall in the value of the rupee and high global oil prices have led to fuel losses climb up substantially.
The trend was satisfactory till May when losses on diesel fell to Rs. 4 a litre, but since then, the plunging rupee took the loss on retail sale of diesel to Rs. 11 per litre, wiping out the effect of the measures.
Among all fuels, the consumption of diesel is the highest in the country. India is the world’s fourth-biggest oil consumer, and diesel accounts for more than 40% of its fuel use.