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Oil Ministry Proposes To Hike Diesel Price By Re 1 A Month

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A diesel price hike stretching over months with price rising by only Re 1/ litre every month? This could well turn out to be real if the Cabinet approves a proposal made by the petroleum ministry.
The oil ministry has proposed a Rs 3-4.50 per litre hike in diesel price and Rs 100 in LPG rates along with raising the number of subsidised cooking gas cylinders for households to nine a year from the current cap of six.

On diesel, it has proposed a 3-4.50 per litre hike in one go or in monthly instalments of Re 1 or Rs 1.50 per litre. From April, it wanted Re 1 a litre increase every month till such time that the current loss of Rs 10.16 is wiped out.
The ministry has moved a note for consideration of the Cabinet proposing options for meeting a record Rs 160,000 crore deficit arising from selling auto and cooking fuels below their cost.

Sources said that since the finance ministry has refused to bear additional subsidy arising from raising cap on supply of subsidised LPG, the ministry has proposed to make up for the shortfall by raising prices.

It has proposed to raise LPG rates by Rs 100 per 14.2-kg cylinder in two instalments to make up for a fifth of the Rs 490.50 per bottle loss being incurred currently.

Sources said the ministry has also proposed raising kerosene price by 35 paise a litre per month or Re 1 a litre per quarter till March 2015.

The ministry's proposal, however, is unlikely to come up at the 10 January 2013 Cabinet meeting, they said.

According to ministry estimates, raising the cap to nine subsidised cylinders would lower savings to Rs 2,500 crore per annum, compared to the savings of Rs 12,000 crore estimated when six cylinders are issued at subsidised rates and the rest sold at market price.

In September, the government limited the supply of subsidised LPG cylinders to six per household in a year, leading to protests from both within the ruling alliance and outside.

Sources said the ministry's note to Cabinet is based on recommendation of the Vijay Kelkar Committee, which was appointed by the Finance Ministry to suggest a roadmap for fiscal consolidation.

The panel had recommended an immediate hike in price of diesel by Rs 4 per litre, of kerosene by Rs 2 a litre and of LPG by Rs 50 per cylinder.

Price of diesel, which currently costs Rs 47.15 per litre in Delhi, was last revised on September 14 when it was hiked by a steep Rs 5.63 per litre. Kerosene rates have not changed since June 2011 and it currently costs Rs 14.79 per litre in Delhi.

Subsidised LPG costs Rs 410.50 per 14.2-kg cylinder and any household requirement beyond current cap of 6 cylinders is to be bought at near market price of Rs 895.50 per bottle.

State-owned oil companies currently sell diesel at a loss of Rs 10.16 per litre, kerosene at Rs 32.17 a litre and LPG at Rs 490.50 per 14.2-kg cylinder.

Oil Minister M Veerappa Moily had last week stated that the government was considering raising the cap on supply of subsidised cooking gas (LPG) cylinders and Kelkar committee recommendations were being "processed" to be put up before the Cabinet at an appropriate time.
India, which imports more than 80 per cent of its fuel needs, liberalised petrol prices in June 2010 but continues to regulate diesel prices to protect the poor.

Prime Minister Manmohan Singh has recently said the country must gradually bring local fuel prices in line with global prices.