As general elections approach, the UPA government, which raised dearness allowance to 100% from 90% to benefit 5 million government employees and 3 million pensioners, is learned to be lining up another parting gift for voters: it may soon do away with the monthly hikes in diesel prices.
“The diesel price hike is an extremely sensitive issue and has a direct impact on household budgets... keeping its impact in mind, there is a strong demand within the (Congress) party that this be done away with before going to polls,” a senior UPA leader said, while seeking anonymity.
When the government last year decided to increase diesel prices every month by 50 paise a litre, the losses on the fuel sales stood at Rs. 10.80 per litre. After 14 hikes totaling nearly Rs. 8 since January 17, 2013, the under-recovery from diesel sales is still about Rs. 8 a litre, the hikes getting undone by the rise in global crude oil price and a fall in the value of the rupee against the dollar.
Diesel was priced at Rs. 47.65 a litre (in Delhi) in February 2013. The current price is Rs. 55.48 a litre, up Rs. 7.83.
“Consumers cannot be burdened with monthly hikes for an indefinite period. Also after the results of the recent assembly elections, the Congress party is seriously thinking of doing away with the monthly 50 paise a litre hike in diesel prices,” the minister said.
Nomura Equity Research indicated as much in a recent research report. “The Congress’ weak performance at the recent assembly elections and high inflation (15-month high 7.52% in November), may force the government to rethink on its monthly diesel hikes,” the Nomura Equity Research report said.
Petroleum minister M Veerappa Moily has been maintaining that the hikes would continue, as any decision to stop them are likely to worsen market sentiments and hit the share prices of oil marketing companies.