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Polls to make diesel price path slippery

New Delhi, March 3: State-owned oil companies are likely to put on hold the monthly hike in diesel prices ahead of the general elections. The dates for the polls will be announced in the next few days.

“The hike in diesel prices is an extremely sensitive issue, especially during polls, as it impacts the kitchen budget of households and has a cascading effect on all commodities transported through road. Considering the sensitive nature, there are strong indications from the ruling party to be extremely cautious in considering diesel price hike,” oil industry sources said.

In January last year, the cabinet allowed state fuel retailers to raise diesel prices in small doses every month until the prices are aligned with market rates.

However, the difference between the retail and market rates failed to narrow down over the last one year as the rupee depreciated while international prices remained firm. India imports about 80 per cent of its crude oil needs.

After 14 hikes totalling around Rs 8 since January 2013, the under-recovery from diesel sales is still at Rs 8.37 a litre.

During the April-December period of this fiscal, state-owned oil companies have incurred a loss of Rs 47,655 crore on selling diesel below the market price. In 2012-13, the losses on diesel were Rs 92,061 crore.

“The petroleum minister is always under political pressure against any hike in fuel prices, but he has given full freedom to oil marketing companies to raise prices by 50 paise a month, according to the cabinet decision. He did not stop the companies from hiking diesel prices during the recent Assembly polls, despite political pressures,” a senior oil ministry official said.

However, the poor performance of the Congress in the state polls seems to have forced a rethink.

Sources close to the minister said “there is a serious thinking of putting on hold the monthly hike in diesel prices as consumers cannot be burdened for an indefinite period”.

The move to put on hold the diesel price hike runs contrary to the fiscal policy strategy tabled by finance minister P. Chidambaram in the interim budget.

“It is expected that the gap between the administered price and market price of diesel will be eliminated by early fiscal 2014-15. Thereafter, both petrol and diesel would be deregulated and linked to market prices,” said the statement.

 
 
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