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Quick decision essential to trim diesel subsidy: Rangarajan

09 Jan 2013 Evaluate

To reduce the mounting subsidy bill, the government should act quickly to raise diesel rates to bring them in line with global prices, said Prime Minister’s Economic Advisory Council Chairman C Rangarajan. While addressing an event, Rangarajan said, ‘I think we need to cut subsidies’ proportion of GDP. Therefore, there is an imperative need to reduce the diesel subsidies.’

By adding further he said, it has become absolutely essential to adjust domestic prices in line with crude prices globally. Further, if the government accepts the recommendations of Vijay Kelkar Committee, diesel prices may have to be raised by Rs 10 a litre over the next one year. The committee, which was appointed by the finance ministry to devise the fiscal consolidation roadmap, had in its report recommended raising diesel and kerosene rates in a phased manner.

Scrambling to find ways to meet a record Rs 160,000 crore deficit expected this financial year on selling diesel, cooking gas (LPG) and kerosene below their production cost, the price hike is being considered. Further, of this, close to Rs 60,000 crore will come from upstream companies ONGC, OIL and GAIL India and for the rest, the oil ministry has asked the finance ministry to give cash subsidy.

Currently, state-owned oil companies sell diesel at a loss of Rs 9.28 per litre, and the hikes over the next 10 months will eliminate all of the losses and clear the government from providing any subsidy on the nation’s most consumed fuel. At present, diesel costs Rs 47.15 a litre in Delhi, was last revised on September 14 when it was hiked by a steep Rs 5.63 per litre.

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