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Get ready for LPG, diesel price hike

Diesel to cost Rs 4/litre more, LPG minus subsidy will be Rs 800; no change in kerosene price

business Updated: May 24, 2012 01:26 IST

After Wednesday’s hike in petrol prices, the government could raise diesel and domestic cooking gas prices next, as it struggles to tighten its fiscal belt.

The chairman of the Prime Minister’s Economic Advisory Council C Rangarajan has suggested a diesel price hike of R4 a litre and charging of cooking gas at market prices beyond four cylinders a year.

Currently, the government pays a subsidy of Rs 480.50 on every household LPG cylinder. If this subsidy were to be withdrawn, each LPG cylinder could cost upwards of Rs 800.

A further round of fuel price hike will fan prices of most goods, even as retail inflation for April stood at 10.36%.

In a letter to some key ministers, including those in charge of petroleum, finance and food, Rangarajan said whittling down petrol and diesel subsidies could save the government Rs 40,000 crore annually.

The letter however did not seek a revision of kerosene prices, a fuel used mainly by the poor. Arguing against raising fuel subsidy bill further, Rangarajan sought “immediate action” to bring it down.

Faced with bulging granaries and inadequate storage capacity, Rangarajan has also suggested paring down stocks of state-held foodgrains through additional allocation to the needy, open-market sale and exports.

Food minister KV Thomas on Wednesday said his ministry agreed to Rangarajan’s proposals but a final call would likely be taken by an empowered group of ministers next week.

Additional food handouts at the government’s expense — about 10 million tonnes — will, however, cost the government about Rs 13,000 crore, according to his calculations.

Rangarajan also suggested export of two million tonnes of wheat from the government account and sale of three million tonnes in the open market.

First Published: May 24, 2012 00:15 IST