Subsidised diesel sales to transport utilities may continue

A little more than a week after the Supreme Court endorsed its order making it mandatory for state public transport utilities to buy diesel at market price, the government is considering withdrawing the relevant order and continuing supplies to these bodies at subsidised rates.

"The oil ministry is mulling the withdrawal of the order that made it mandatory for STUs (State Transport Undertakings) to buy diesel at market price. We have received representation from various states on the issue," petroleum minister Veerappa Moily said on Tuesday.

The sale of diesel at market prices would enable the state-owned oil marketing companies to reduce their under-recoveries, but at the same time it would hurt the financials of the already loss-making public transport utilities, who would have to pass on burden to passengers. With general elections due in about seven months, the government may hesitate to do this.

The STUs have been protesting against the January move of the government to ask bulk users like them, as also the railways and defence, to buy diesel at the market price, which is currently Rs14.50 per litre over the petrol pump price.

Bulk diesel sales accounted for roughly a fifth of the consumption of diesel before the order, and since the removal of the subsidy for bulk consumers, there has been a shift away from bulk sales, reports PTI.

Moily said that the oil marketing companies have also reported problems owing to the move to offer STUs diesel at market prices. "Oil marketing companies have reported that the dual pricing mechanism is not working since STU bus fleets are taking fuel from petrol pumps causing hindrance in the smooth functioning of retail outlets and in the process wasting fuel," the minister said.

The final call will be taken by the union cabinet. "We will consider allowing STUs to purchase diesel at the subsidised price in view of the need to encourage public transport but this would be subject to their active cooperation in our conservation campaign," Moily said.

The Supreme Court had earlier this month endorsed the government's decision to charge market prices for diesel sold to bulk buyers such as defence, railways and transport corporations. The apex court had said that subsidises cannot continue forever and ultimately the economy has to survive.