The Telegraph
Thursday , January 10 , 2013
Since 1st March, 1999
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Fuel price hike in pipeline

New Delhi, Jan. 9: The government may tomorrow take up a cabinet note that proposes to increase the price of diesel and cooking gas cylinders, while raising the cap on subsidised cylinders per household to nine from six.

“Whether the decision will be taken or not will be a political call but a cabinet note on the issue has been circulated,” officials said.

The government may hike diesel prices by Rs 2-3 a litre, though the official note calls for an increase of Re 1 per litre every month for 10 months.

Prime Minister Manmohan Singh recently came out in favour of reducing fuel subsidies and said energy prices in the country were much below international prices and must be brought in line with global rates.

Since the government will face Parliament in February and go on an election mode with the budget, it is unlikely to raise prices by Rs 10 a litre. Instead it may opt for one or two increases of Rs 2-3 per litre, said officials.

The Congress has been demanding an increase in subsidised cylinders. The finance ministry has made it clear that an increase has to be matched with a hike in the price per cylinder.

Subsidised gas cylinders cost Rs 410.50 per unit in the capital. This can be increased by Rs 50-80 a cylinder, officials said. “However, whether the increase will happen or whether the cap will be relaxed at this stage, will be a purely political decision,” officials said.

In September, the government had hiked diesel prices by Rs 5 a litre and introduced a quota of six subsidised LPG cylinders per year, weeks before releasing a report by the Vijay Kelkar panel.

The Kelkar committee, appointed by the finance ministry to suggest a road map for fiscal consolidation, has suggested an immediate hike in fuel prices and the complete deregulation of diesel prices by the start of the 2014-15 fiscal. It also suggested raising kerosene and LPG rates.

At present, state-owned oil companies are losing Rs 10.16 per litre on diesel, Rs 32.17 a litre on kerosene and Rs 490.50 on cooking gas (14.2-kg cylinder). The oil subsidy outlay after the first supplementary demands for grants is about Rs 72,260 crore during fiscal 2012-13.

The hike in the supply of subsidised cylinders would lead to an additional Rs 9,000 crore of subsidy payout.

Bank capital

The government is also likely to consider the proposal to infuse Rs 12,000 crore into public sector banks. It is one of the agendas of the meeting (tomorrow), according to PTI.

The finance ministry has approved investment of Rs 12,000 crore in 12 public sector banks, including the State Bank of India, Central Bank of India and United Bank of India.

The funds will be disbursed before March to these banks.

The government has been infusing funds in public sector banks in the last couple of years to strengthen their finances. It has injected about Rs 32,000 crore in the previous two financial years.

Besides, the finance ministry will seek cabinet approval for fund infusion in public sector banks till March 2018, sources said.