No diesel car subsidy: Pranab proposes,govt had disposed

In 2010-11,India consumed 8.9 million tonnes of kerosene while diesel sales were the largest at 59.8 million tonnes.

Diesel is currently sold below its “economic cost” with the subsidy at Rs 6.82 per litre and kerosene at a subsidy of Rs 23.74 per litre.

He said the OMCs had not been able to restrict the siphoning of subsidized LPG for households to commercial users such as hotels and restaurants as the incentive to divert was very high.

Domestic cooking gas is sold at Rs 247 per cylinder less than what should be charged from the consumers.

Mukherjee today hinted at removing the subsidy on diesel for passenger cars which consumed 15 per cent of the fuel. Diesel cars currently account for 30 per cent of car sales and the analysts expect diesel car sales to hit 50 per cent by 2015.

The idea of dual pricing was first brought up in September 2008 with the Prime Minister Manmohan Singh asking then Petroleum Minister Murli Deora to work on a system that would see car owners and industrial users pay a higher price than transporters or farmers.

But it was shot down last November by Deora as it was difficult to implement. “There is no way you can have dual prices for diesel. On a petrol pump,you cannot have one price for cars and another price for tractors brought by farmers,” he had said.

A former Petroleum Secretary said that this “thought” had come up at one of the strategic meets with the Indian Oil Corp but was turned down as it was difficult to execute and required creating a new distribution channel with a fresh set of identification cards.

“BPL cards are used for delivering kerosene at ration shops. What cards do you give to farmers who do not fall under the BPL category?” he said.

Another problem,said an OMC official,was bulk diesel sales to the Indian Railways and the defence sector. “If these two are charged market rates,then the burden would either be passed on to the commuters or to the Budget. And then there is a possibility of diversion as had happened during the 1971 war when petrol and diesel sales were rationed,” he said. The two bulk consumers accounted for 11.2 million tones of sales last fiscal.