'Govt can impose cess on retail sales of diesel to cut price arbitrage'

The government could levy a cess to block diversion of bulk diesel by companies trying to take advantage of price arbitrage.

Arvind Mayaram, secretary, department of economic affairs of the finance ministry said, "It is not that difficult to control. Further, diesel prices are being corrected anyway and if the difference between bulk and retail is eliminated, then how does it matter where you buy from?"

Speaking to The Indian Express in a post-Budget interview, Mayaram said the oil marketing companies can track sudden surges in off take from petrol pumps.

"Also,every state has allocations. IOC, for instance , knows that the state road transport corporation is a bulk buyer and has an estimate of how much diesel they consume." He said the government is confident that reforms on petroleum subsidies will result in savings of Rs 45,000 to Rs 50,000 crore in 2013-14.

"A Re 1 hike in diesel roughly helps save Rs 8,000 crore. So in the next six months, we could easily earn about Rs 45,000 crore from diesel and the savings from capping the subsidised LPG to nine cylinders," Mayaram said.

Targeting a fiscal deficit of 4.8 per cent of the GDP in 2013-14, the Union Budget slashed the petroleum subsidy bill by 32 per cent to Rs 65,000 crore as against the revised estimate of Rs 96,879.87 crore for 2012-13.

Mayaram also indicated that though the expenditure on the planned Food Security Bill is still being worked out, there could be some savings for the exchequer. "The public distribution system will be subsumed under the Act. There will be no cash transfer for food but digitisation of beneficiaries will clean up the list. To that extent there will be lesser expenditure on food subsidy," he said. In 2013-14, the government has budgeted Rs 90,000 crore for food subsidy including Rs 10,000 crore for the Food Security Bill.

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