“Government has, in principle, agreed to make the prices of diesel market
determined,” Minister of State for Finance Namo Narain Meena said in a written
reply to the Rajya Sabha.
While petrol prices are market-linked, the government fixes the rates of
LPG, kerosene and diesel, which results in a large budgetary expenditure on
subsidies.
“There is no proposal at present to fully deregulate cooking gas price,”
Mr. Meena said.
He said the government continues to fix the price of diesel in order to
shield the common man from the impact of rising crude oil prices and the
resultant inflation.
“In order to insulate the common man from the impact of rise in international
oil prices and the domestic inflationary conditions, the government continues
to modulate the retail selling price of diesel,” Mr. Meena added.
Global crude oil prices have surged since the beginning of 2012 on account
of geo-political concerns in the Middle East
and abundant global liquidity. The price of Brent crude rose to USD 120 a
barrel in mid-April from USD 111 in January.
For the current fiscal, the government has made a provision of Rs 43,580
crore for oil subsidies, of which Rs 40,000 crore has been earmarked as
compensation to oil marketing companies (OMCs) for selling petroleum products
at lower than market rates.
During the 2011-12 fiscal, the government has paid Rs 65,000 crore to OMCs
on account of under-recoveries, of which Rs 20,000 crore alone was for the
January-March quarter.
High subsidies are putting pressure on the country’s fiscal deficit, which
touched 5.9 per cent of GDP last fiscal and is pegged at 5.1 per cent in
2012-13. India
The government targets to bring down the subsidy bill to below 2 per cent
of GDP this fiscal and 1.75 per cent in the subsequent years.
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