The Telegraph
Wednesday , June 25 , 2014
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Diesel model for other fuels

New Delhi, June 24: The government is considering a proposal to raise cooking gas and kerosene prices in a staggered manner to cut the ballooning subsidy bill.

Encouraged by the diesel experiment, the oil ministry is considering a hike in LPG cylinder prices by Rs 5 to Rs 10 per month and kerosene by about Rs 1 a litre.

However, a hike of Rs 5 every month can wipe out the under-recovery of Rs 432.71 every cylinder in as many as seven years.

Officials said the ministry felt the monthly increases could be as high as Rs 10 if the political leadership agreed to take a stand.

“The Iraq crisis has posed a fresh challenge to the government and there may not be any other way out than increasing prices of fuels,” officials said.

In kerosene, the entire subsidy of Rs 32.87 per litre can be wiped out in two-and-a-half years if prices are raised by a rupee every month.

While a Rs 10 hike in the price of an LPG cylinder could cut the subsidy bill by Rs 7,000 crore per annum, the increase in kerosene prices would lower it by another Rs 850 crore each year.

However, officials said each household would continue to be entitled to 12 subsidised cylinders a year.

At present, a subsidised LPG cylinder costs Rs 416 in Calcutta, while a non- subsidised cylinder costs Rs 946.

Fuel subsidy is the biggest drain on the exchequer. In the current fiscal, subsidy on diesel, LPG and kerosene is estimated at Rs 115,548 crore. Of this, LPG alone accounts for Rs 50,324 crore and kerosene Rs 29,488 crore.

The UPA government had in January 2013 decided to raise diesel prices by 40-50 paise a litre every month till there is no under-recovery. The diesel under-recovery has fallen to Rs 1.63 a litre at the end of the last fortnight.