Kirit Parikh with M. Veerappa Moily in New Delhi on Wednesday. (PTI)
New Delhi, Oct. 30: A panel set up by the government to advise on subsidies and pricing of fuels wants diesel price to be hiked by Rs 5 per litre, domestic cooking gas by Rs 250 per cylinder and kerosene by Rs 4 a litre.
The committee headed by Kirit Parekh, former member of the Planning Commission, said this would help to cut the huge oil subsidy bill by Rs 72,685 crore.
However, the recommendations may be difficult to implement at the moment with the government giving priority to political considerations over economic necessity.
“We recognise that it may not be possible right now to increase prices by the same amount as suggested in the report,” Parikh said after submitting the report to oil minister Veerappa Moily.
The report favoured a reduction in the quota of subsidised LPG to six cylinders per household in a year from nine. It also suggested phasing out subsidy on cooking gas in two years through a gradual price hike. The panel has recommended a Rs 4 per litre increase in kerosene price.
For diesel, it recommended a fixed subsidy of Rs 6 per litre and deregulation in a year’s time.
Moily said the government would study the report and discuss the issue with the finance ministry and if needed, take it up at the cabinet level. The recommendations of the committee are not binding.
With assembly polls in November and general elections next year, the government may find it difficult to raise fuel prices sharply at a time inflation is still high.
Inflation has accelerated to a seven-month high of 6.4 per cent in September, driven by higher food prices and fuel inflation, which is running at about 10 per cent.
The diesel price hike, as suggested by the panel, can cut the fuel subsidy bill by as much as Rs 16,000 crore from November till the end of the current fiscal. Diesel accounts for over 40 per cent of refined fuel used in the country.
At present, the price discount on diesel is Rs 10.52 a litre, kerosene Rs 38.32 and LPG Rs 532.86 per cylinder.
Together, they would result in a revenue loss of Rs 138,435 crore this fiscal. This has to be met through a combination of government cash subsidy and contribution from upstream firms such as ONGC, Oil India and GAIL.