Diesel price hike hinges on monsoon

Farm sector consumes 19.21% of diesel sales with agriculture pumpsets using 6.60% of it.

Written by Amitav Ranjan | New Delhi | Published: July 30, 2012 12:43:45 am

A weak monsoon is drying up UPA government’s chance of raising retail price of diesel even though its key economic adviser is pushing for a Rs 5 per litre hike in the petroleum product.

Sources said the Prime Minister’s Economic Advisory Council had worked out the required price revisions in diesel,cooking gas and kerosene but is keeping it in abeyance following indication from the Prime Minister’s Office to await the final outcome of the monsoon.

Farm sector consumes 19.21 per cent of diesel sales with agriculture pumpsets using 6.60 per cent of it. Any change in diesel price would raise their input costs and would result in increasing the minimum support prices of foodgrain,they said.

The Economic Advisory Council,sources said,was suggesting Rs 5 per litre hike in diesel,Rs 2 per litre in kerosene and Rs 100 per cylinder of domestic cooking gas with a cap of four subsidised cylinders per annum to each consumer to keep the Centre’s contribution pegged at around Rs 40,000 crores.

C Rangarajan,chairman of the PMEAC,has often said that decontrol of diesel prices was necessary to contain fiscal deficit,which had ballooned to 5.76 percent in 2011-12 fiscal.

At present,state-run oil marketing companies lose Rs 9.95 a litre on diesel,Rs 27.20 per litre on kerosene and Rs 319 per cylinder on domestic LPG which puts their estimated annual loss in 2012-13 at Rs 1,38,541 crores.

The EAC indicated price rise would bring in Rs 43,166 crores,and with upstream companies contributing Rs 55,000 crores (as indicated),the central exchequer’s burden would be limited to Rs 40,375 crore.

However,all this remains only on paper as the Petroleum Ministry is unsure of the political will. Though it was contemplating sending a price revision proposal for the Cabinet Committee on Political Affairs as its successor — the Empowered Group of Ministers — stands disbanded due to Pranab Mukherjee’s elevation as the President.

However,that too stands held up as there was no word from the Cabinet Secretariat until mid last week on CCPA meeting being held. The CCPA decided price revision until April 2010 when the Empowered Group of Ministers (EGoM) was formed. The EGoM has not met since June 25,2011.

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