Government Going Slow On Diesel Price Deregulation (21-Jul-2010)
The elated oil marketing companies (OMCs) over the auto fuel deregulation announcement will have to wait a bit longer as the government has no immediate plans to bite the bullet. Facing uproar from opposition political parties over the petrol price deregulation, the persistent high level of overall inflation has virtually compelled the government to go slow on the proposed move. However, government has been reiterating its commitment to cut wasteful subsidies going forward.
“We have not thought about decontrolling LPG (cooking gas), kerosene or diesel right now. We have to look at a lot of things, like (its) effect on consumer, before we do that,†Cabinet secretary KM Chandrasekhar said, “I can’t say we have a road map to do this (decontrol) at this point of time.â€
India’s WPI inflation has been hovering in the double-digit zone for the last five months and would take some more months before cooling down significantly. In this backdrop, any sharp hike in diesel prices would have its multiplier effect on the general price level and could lead to the spread of cost push inflation.
The Empowered Group of Ministers (EGoM) had decided last month to decontrol petrol prices with immediate effect and the diesel prices would be made market-determined in due course of time. However, diesel prices were hiked by Rs 2 per litre with immediate effect. Among other fuel categories, the EGoM had hiked the prices of kerosene by Rs 3 per litre while that of LPG gas was increased by Rs 35 per 14.2 kg cylinder. The government however was also categorical in stating that prices of cooking fuels will not be freed and would continue to attract subsidy in the foreseeable future.
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