Diesel price increase on the cards

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With presidential elections over and Mr Pranab Mukherjee set to occupy the 340-room Rashtrapati Bhavan after taking oath on Wednesday, one can expect some policy actions to emanate from the next-door buildings in and around Raisina Hill this week.

Prominent among these is a long-pending decision on raising diesel prices. Diesel, technically speaking, is an ‘in-principle’ decontrolled fuel, whose prices can be raised without the need for any formal Cabinet approval.

The decision in this case — unlike in petrol, which is ‘fully-decontrolled’, with oil marketing companies supposedly ‘free’ to set prices — is taken by the Petroleum Ministry based on informal consultation with other ministries.

The Petroleum Ministry is apparently looking at a hike of Rs 5 a litre for diesel, which comes more than a year after the last increase on June 25, 2011 and more than two years after an empowered group of ministers (EGoM) had, on June 25, 2010, decided to make it an ‘in-principle’ decontrolled fuel.

“You could see a diesel price increase happening any time this week”, said a top official. While oil companies would also want prices of LPG and kerosene — where they are losing heavily as well — to go up, that may, however, have to wait for clearance by either the Cabinet or the EGoM. “Right now, there is no EGoM, as it was being headed by Mr Mukherjee while he was Finance Minister. Only when it gets reconstituted again can one expect any movement on LPG and kerosene or reforms such as targeted cash transfers”, the official added.

Call of telecom

Besides diesel, there could also be decisions at the Union Cabinet level this week on telecom and financial sector-related matters. The Cabinet is quite likely to fix the reserve price for the upcoming auction of 2G spectrum.

The Telecom Regulatory Authority of India had recommended the base price at Rs 18,000 for 5 MHz of spectrum that any new operator (or those whose licences were quashed by the Supreme Court in February) requires. The EGoM under the Home Minister, Mr P. Chidambaram, which met on Friday, proposed a lowering of this price to a range of Rs 14,000-16,000 crore.

The final call on what the reserve price would be — and also how much of it would be paid upfront — is something that the Cabinet may well decide this week. “It will have to be done fast because of the Court order, fixing August 31 as the last date for completing the auction”, sources in the know pointed out.

Finance matters

The Cabinet may also finalise three finance-related Bills for taking up in the forthcoming monsoon session of Parliament, scheduled to begin on August 8.

These include a Bill to raise the voting rights cap for individual shareholders in private sector banks from the existing 10 to 26 per cent, and those relating to allowing 49 per cent foreign direct investment (FDI) in insurance (against the current 26 per cent) and giving statutory powers to the pension sector regulator.

The Standing Committee on Finance has already given its recommendations for all the three Bills and it is for the Government now to move the amendments accepting or modifying these recommendations. The original pension Bill, for instance, had not explicitly specified any FDI cap, whereas the Committee has proposed this be fixed at the same 26 per cent level as applicable in insurance.

Given the Prime Minister, Dr Manmohan Singh’s recent statements indicating the Government’s new-found determination to push through major reform legislations, there is every possibility of these Bills being considered for Cabinet approval. But knowing the problems this Government has been facing from its coalition partners — the latest one involving the Agriculture Minister, Mr Sharad Pawar’s Nationalist Congress Party — no one can really say whether things will finally start moving this week.

(This article was published on July 22, 2012)
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