Running on subsidised fuel
- Spot-fixing: Chandila was in touch with four sets of bookies, says Delhi Police
- Chinese Premier Li Keqiang arrives, to hold talks with PM on boundary, water issues
- IPL 2013: Delhi Daredevils crash to defeat, finish last
- Jaganmohan's wife attacks CBI, accuses it of working at Congress behest
- Blast accused death: UP govt seeks CBI probe, FIR against 42 persons
This is an interesting piece of statistic to tell the defenders of diesel subsidisation. Across India, huge percentage of power companies which use furnace oil to produce electricity have shifted to subsidised diesel to run their plants. Even after Thursday's revision, at Rs 47 per litre (Delhi price) will be Rs 11.35 cheaper than the price of furnace oil at Rs 58.35. The price difference is a measure of the distance that diesel prices still have to travel to eliminate the awesome distortions that have crept into the economy as a result of the subsidised oil economy. This is a scale of subsidisation that has taken the economy way beyond the usual arguments of diesel versus petrol driven cars in deciding on how far diesel should be subsidised.
The decision of the Cabinet Committee on Political Affairs to present a new oil bill to the economy has to be read accordingly as the first in a long series of painful adjustments. The markets and industry are pleased but only because they too see it as the first among a series of such measures. The household managers too know this and so do the political parties which too have reacted on expected lines. The rise in the price of diesel by Rs 5 per litre and a cap on the number of subsidised cylinders of cooking gas to six in a year will only shave off Rs 20,300 crore from the under recovery of public sector oil marketing companies still leaving an uncovered gap of Rs 1,67,000 crore for them in 2012-13.
The only unknown is how the UPA-led government will react to its own announcement. The election calendar becomes extremely busy from now but if that excuse is used to make this a one off affair the losses for oil companies, the worsening fiscal deficit and India's junk grade will soon loom large on the horizon again. Of the total under recovery for the oil marketing companies the biggest ingredient is diesel at Rs 1,03,000 crore in 2012-13. The situation has not come about suddenly. The empowered group of ministers had on June 25, 2010,decided to go in for market determined pricing for diesel. But the in-principle decision was held back on the fig leaf of inflationary impact. Even now as diesel prices get corrected progressively, the overall impact on the economy will be to push inflation by at least one per cent more. But at prices that are 18.8 per cent lower than even Nepal, the domestic prices had become a sort of a joke.
- Former Ranji player among 3 more held
- Rajasthan Royals to file FIR against tainted trio
- If found guilty, BCCI to ask ICC to erase Sreesanth records
- Top cops among 42 named in death of blast accused
- PM takes tough line on incursion issue
- Security forces blame Maoists, villagers say CoBRA man was killed in ‘friendly fire’