NEW DELHI: An empowered group of ministers led by Pranab Mukherjee will meet by the end of May to consider raising the prices of diesel, LPG and kerosene in order to help fuel retailers IOC, HPCL and BPCL cut their losses and to restrict the outgo of state subsidy.
The ministerial group on ‘under-recovery of petroleum products by oil marketing companies’ would also examine if the subsidy on diesel and domestic LPG could be weaned off from the affluent, who are not the intended beneficiaries. That would depend on price deregulation as well as the implementation direct transfer of subsidy to the really needy. The government is now doing a pilot project on direct transfer of cash subsidy on kerosene to the poor in the Kotkasim tehsil of Alwar district in Rajasthan and in Mysore in the case of LPG.
The EGoM meeting is expected after the budget session of Parliament concludes on May 24, sources said. In what is seen as building tempo for the proposed price revision and an attempt at deregulation of diesel, Prime Minister Manmohan Singh on Saturday said there is a need to rationalize fuel prices and at the same time, ensure that the poor and the needy are shielded from its effects.
Oil retailers are now losing R15 a litre on diesel, R32 a litre on kerosene and R550 a litre on a cylinder of domestic LPG. Although petrol had been deregulated in 2010, companies lose close to R9 on a litre of the ‘rich man’s fuel’ as its price is not being adjusted as per global trends. Retailers have also indicated at the possibility of fuel supply cuts if prices are not revised urgently. The government, which paid R45,000 crore as oil subsidy in 2011-12, wants the total subsidy outgo on food, fertilizer and oil to below 2% of GDP this fiscal, which hinges on oil price revision.