Hike of Rs 130 on subsidized LPG cylinders on cards

09 Jan 2013 Evaluate

The government is reportedly planning to up the prices of subsidized LPG cylinders, currently capped at six a year, by Rs 130 during January-March 2013, besides its plans to hike diesel prices by Rs 1.5 a litre every month, which will take the hike to Rs 4.5 a litre during the period.

Further, on kerosene, the proposal is that the prices be either increased by 35 paise a litre per month or Re 1 a litre per quarter till March 2015. The proposal, which is currently under consideration of government, may be tabled at the cabinet for a final decision by Prime Minister (PM) Manmohan Singh and other senior UPA ministers.

For subsidised LPG, the government has proposed that either the three oil marketing companies, namely IOC, BPCL and HPCL, be allowed to increase the price of each subsidised cylinder by Rs 130, plus VAT as applicable or consumer price of subsidised LPG cylinders be immediately increased by Rs 65 a cylinder and the balance by another Rs 65 a cylinder before March 31, 2013. The proposal further calls for a Rs 50 per cylinder hike to be passed on to the consumer every quarter starting 2013-14 (or after April 1, 2013) till the under-recovery of oil companies for selling fuels below cost price, on LPG diminish to zero.

Meanwhile, for diesel, where the oil companies are currently losing around Rs 9.50 on a litre sale, the proposal calls for an immediate hike in the retail sales price by Rs 4.50 (at Rs 1.50 a month from January 2013 to March 2013) and a Re 1 per litre increase every month thereafter till the under-recovery on diesel totally diminish. Other proposal for diesel includes the prices be increased by 60 paisa a month till the under-recovery on diesel is eliminated and diesel prices are deregulated.

Additionally, it remains important to be highlighted that, all these proposals comes amidst ratings agency’s Fitch maintaining its 'negative' outlook on India's sovereign rating, citing concerns over slowing economic growth, inflationary pressures and an uncertain fiscal outlook. However, government is appearing confident of taking economy in the right track with a slew of its big-ticket reforms and believes that fiscal deficit target is achievable.

Earlier, Prime Minister hinting at Diesel, LPG price hike in a phased manner, said that, “Diesel, kerosene and cooking gas LPG prices may be hiked soon as the government considers Vijay Kelkar Committee recommendations on cutting fiscal deficit”. The Kelkar Committee, which was appointed by Finance Ministry to suggest a roadmap for fiscal consolidation, suggested immediate hike in fuel prices and complete deregulation of diesel prices by start of 2014-15 fiscal. It also suggested raising kerosene and LPG rates.

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