Diesel pricing

In June 2008, I had written a letter to your paper on the issue of rising crude prices. The diesel price was then around Rs 35/litre in Bangalore. I had suggested dual pricing of diesel — a subsidised price for public goods carriers and other bulk consumers, and a market-determined price for retail consumers to check inflation in the short term.

Almost five years later, the Government has implemented the dual pricing of diesel. But instead of subsidising diesel for bulk consumers such as Railways, the Government has given diesel subsidy to retail consumers such as owners of diesel cars.

Within a week, there has been a swift upward movement in the prices of some essential commodities. Thankfully, the Karnataka state-run public transport corporations have not revised passenger fares. How will the State-run transport corporation manage this steep increase in price (Rs 10/litre)? It seems to have found an answer.

The BMTC has resorted to buying diesel in retail outlets. Since the diesel at the retail outlets is almost Rs 10 cheaper, the buses are tanking up in these outlets. Besides creating traffic chaos, this is seriously affecting the supply-demand balance and economics of diesel in the city.

If other state transport corporations and bulk consumers follow suit, then we will have a serious crisis on our hands. This will defeat the whole purpose of “partial de-regulation” of diesel and only bleed the oil marketing companies.

No rational explanation has come from the Ministry of Petroleum on this irrational pricing of diesel. No doubt, deregulation of diesel is necessary. But subsidising the retail consumer (cars) is an irrational move. The Government must immediately withdraw or reverse this dual pricing of diesel.

The Government must come out with a White Paper on fuel pricing, with a formula of fuel pricing vis-a-vis international crude prices.

M. S. Sunil

Bangalore

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