On a day of taking tough decisions, the Government took the most difficult of all: Raise diesel prices by Rs 5 a litre (excluding VAT). The late-evening move also capped the number of subsidised LPG cylinder a household can get at six per year.

Earlier in the day, the Government de-allocated four coal blocks.

Diesel will now cost approximately Rs 47 a litre in Delhi. The price revision comes after more than a year.

However, PDS kerosene was left untouched.

While not tampering with the retail price of petrol, the Government decided to reduce the excise duty on the fuel by Rs 5.30 a litre from Rs 14.35 (plus education cess of 3 per cent making it 14.78 per cent). But this benefit is not being passed on to the consumer.

An official statement said the Cabinet Committee on Political Affairs’s (CCPA) decision would be implemented with effect from midnight of September 13/14. The revised diesel price in Delhi will be approximately Rs 47 a litre.

Not wanting to be labelled the bad messenger, Petroleum Minister S Jaipal Reddy tactfully passed on the decision making to the CCPA. But Jaipal Reddy has been maintaining that difficult decisions have to be taken.

The CCPA, under the chairmanship of Prime Minister Manmohan Singh, took stock of the situation arising out of projected under-recoveries of Rs 1,87,127 crore for current fiscal for the public sector oil retailers in the wake of high international crude oil prices and the sharp depreciation of the rupee against the dollar.

The statement said out of this Rs 5 a litre (excluding VAT) hike in diesel, Rs 1.50 is on account of the hike in excise duty. The balance Rs 3.50 a litre will go to reduce the under-recoveries of the oil companies by about Rs 15,000 crore for the remaining part of the financial year. The under-recovery on sale of diesel during 2012-13, even after this price hike, is estimated to exceed Rs 1,03,000 crore. Further, branded diesel will be sold at market rate.

Cooking Gas

The CCPA also decided to restrict the supply of subsidised LPG cylinders to six for each household annually. According to the statement, this will help in reducing the under-recovery by about Rs 5,300 crore for the remaining part of the financial year. During the fiscal, even after this measure, the companies are estimated to lose above Rs 32,000 crore on domestic LPG.

The number of subsidised LPG cylinders available to each consumer in the remaining part of the current financial year will be three. While subsidised cylinders will continue to be available at Rs 399 a unit (in Delhi), the market rate will be notified by the oil companies every month.


(This article was published on September 13, 2012)
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