Govt loosens grip on diesel prices; ups LPG cap

17 Jan 2013

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The government today partially deregulated diesel prices by giving oil marketing companies leeway to periodically revise these.

At the same time, it bowed to popular demand and raised the number of subsidised cooking gas cylinders available to households from six to nine.

Petroleum minister M Veerappa Moily told reporters in New Delhi that the country's three state-controlled oil retailers have been authorised to make price correction on diesel from time to time depending on market conditions. However, this price correction would be in small doses, he clarified.

Moily said the cap on subsidised LPG cylinders would be raised from the next fiscal year beginning April 2013.

The minister said the government decided against an immediate hike in the prices of diesel, LPG and kerosene, as was recommended by his ministry. Reports had been rife since last week that the price of diesel would be hiked with immediate effect and that the hikes would continue on a monthly basis.

The centre had, on Wednesday, blamed the Election Commission for delay in raising the cap on LPG cylinders. The commission had earlier decided that this decision could be seen as populist as it tended to violate its pre-election 'model code of conduct'.

The government is facing a deficit of Rs1,60,000 crore from selling petro-fuels below cost. With the finance ministry unable to bear this burden, Moily's petroleum ministry had suggested an immediate and continuing hike in prices. The cabinet has managed to work out a compromise that will not have immediate political repercussions.

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