Poll compulsions force diesel price rise rethink

Last Updated: Wed, Mar 26, 2014 05:29 hrs

A day after the Election Commission asked for a pause on the rise in domestic natural gas prices, political pressures on Tuesday appeared to have forced a rethink on the monthly increase in diesel price.

Though officials in the petroleum & natural gas ministry remained tight-lipped on the 50-paisa monthly diesel price increase, there were indications pressure was mounting on minister M Veerappa Moily to take up the matter with the Cabinet Committee on Political Affairs.

With Moily expected to return later this week, the ministry has yet to make up its mind on whether or not to allow another tranche of diesel price increase for April and May, when the country goes to polls. The matter will need to go to the Election Commission if the government decides to put on hold the phased decontrol of diesel prices.

According to multiple sources privy to the development, top Congress leaders were not in favour of a diesel price hike.

"As of now, there is no change in the Cabinet decision for a monthly dose of diesel price increase. If it has to be sent to the Election Commission, the decision should come from the Cabinet Committee on Political Affairs," an official said.

The monthly diesel price increase happens at the beginning of every month.

In a similar situation in May last year, Moily had personally stepped in to delay the diesel price rise till the Karnataka Assembly elections were over.

It was on January 17 last year that the Congress-led UPA government had opted for a phased decontrol of diesel prices, with a monthly increase of 50 paise.

Putting the price hike on hold would be a policy decision, with a populist undertone making it mandatory for the government to seek the Election Commission's approval.

Though the poll panel's decision can go either way, officials say the petroleum ministry might be cautious before giving a go-ahead to oil marketing companies.

Under a phased decontrol, diesel prices have been increased 19 times - from Rs 47.65 to Rs 55.48 a litre in Delhi. Instead of linking diesel price to market rate, oil marketing companies have been asked to increase the price in small doses every month. At present, revenue loss to oil companies on sale of every litre of diesel comes to Rs 7.16.

Besides diesel, on kerosene and domestic LPG, where the losses are Rs 36.34 a litre and Rs 605.80 a cylinder, respectively, the firms suffer a daily loss of Rs 399 crore.

Though a committee led by former Planning Commission member Kirit Parikh had recommended a higher dose of hike in diesel price - of about Rs 5 a litre - the petroleum ministry never took the matter to the Union Cabinet.


* Decontrol: Govt decontrolled diesel pricing in Jan 2013

* Price revisions: Since decontrol, the diesel price has been revised 19 times - from Rs 47.65 to Rs 55.48 a litre

* Underrecovery on unit sale: Loss of revenue on sale of each litre of diesel stood at Rs 7.16 as of the second fortnight of March

* Loss to OMCs: Oil marketing companies are suffering a daily loss of Rs 399 crore on sale of diesel, domestic LPG and kerosene before cost

* Govt's loss: The overall underrecovery for the current financial year is expected to be around Rs 1,41,000 crore

* On hold: The Election Commission had on Monday put an increase in domestic natural gas price on hold till the Lok Sabha polls are over

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