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HindustanTimes Sat,20 Dec 2014

Govt likely to call off monthly diesel price hikes

HT Correspondent, Hindustan Times  New Delhi, April 07, 2014
First Published: 01:34 IST(7/4/2014) | Last Updated: 02:23 IST(7/4/2014)

You may be spared the monthly diesel price hikes, at least for now.

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The 40-50 paise per litre increase in prices, which was put on hold for the month of April, is unlikely to be resumed and may be completely done away with, a top petroleum ministry official told HT. “The monthly hike policy for diesel is unlikely to be resumed,” he added.

The petroleum ministry had justified its decision to withhold the price hike of 50 paise a litre in April on grounds that losses on the sale of the fuel had fallen to less than Rs. 6 a litre and there was no need to increase rates since an expert committee headed by Kirit Parikh had suggested that the government should provide a subsidy of Rs. 6 a litre on diesel.

Oil companies had said that the matter had been referred to the Election Commission and since they were yet to hear from the authority the decision to hike diesel prices was put on hold.

However, sources within the ministry said the move was mainly due to the Lok Sabha elections as the government had never accepted the Parikh Committee recommendation and the government’s decision to increase diesel prices in small doses to reduce subsidy did not set any limits.

The Cabinet had in January last year decided that diesel prices should be raised by 40-50 paise a litre every month until losses on the fuel were completely wiped out.

However, there was no evidence of the Rs. 6 threshold when diesel prices were raised on May 12 and June 1 last year, when the under-recovery or loss on the fuel slipped to Rs. 3.81 and Rs. 4.87 per litre, respectively. According to sources, the ministry had planned to approach the Cabinet in February to halt further diesel price increases but couldn’t do so before last month’s announcement of the general elections.

There had been demands from within the ruling Congress party to stop the increases, 14 of which had taken place since January 2013 for a cumulative total of Rs. 8.33 a litre.

Interestingly, oil companies skipped raising diesel prices in April last year, when assembly elections were held in Karnataka. However, they made up by hiking diesel prices by 90 paise in the following month.

Indian Oil Corp, the country’s largest oil firm, recently said that it had been implementing the government’s order to “increase the retail selling price of diesel within a small range every month until further orders.”

“The under-recovery on diesel is currently Rs. 5.93 a litre, which is below Rs. 6 per litre, which is the interim subsidy cap recommended by the expert group of Kirit Parikh. Hence, the issue of monthly price increase is under consideration of the government and the matter has been referred to the Election Commission. A decision regarding revision of diesel retail price shall therefore be taken on receipt of further advice by the government in this context,” a statement by the company had said.

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