In what seems to be an indication of dumping of another expert panel recommendation on oil price reforms, Petroleum Minister M Veerappa Moily on Friday said the government appointed Kirit Parikh report is “good economically” but the government has to take a balanced view on whether it can be practically implemented.
The committee which submitted its report in October had suggested an immediate hike in prices of diesel by Rs 5 a litre, kerosene by Rs 4 per litre and LPG cylinder by Rs 250. It had also suggested phasing out of diesel subsidy in one year besides reducing the entitlement of subsidised cooking gas cylinder from six from nine.
"Economically that is the right decision but how practical is it, how we can apply it is something we have to take a view on it," Moily told reporters here.
"If the country has to go forward, reform is a must. But the question is whether we can implement what has been recommended because we have to balance between the consumer (interest) and government revenue. A balance view will be taken on the report," he said.
Parikh, who had also done a detailed study on how much a common man would be impacted through the decision to raise administered fuel prices, had said while presenting the report two months ago that continuing with large subsidies will impact the common man adversely.
“If you raise diesel price by Rs 5 a litre, the impact on inflation would be two per cent in the next quarter. But six quarters down the line, you will have lower inflation and higher growth. It is really important to recognise that what you do today also has an impact on the future,” Parikh had said.
But he had also accepted in the same vein that closer to elections, it would not be possible for the government to implement the report.
However, on the diesel price hike every month, Moily said that election results would not drive UPA government or Congress to panic and the government would continue to act in the best interest of the country and its people.
Diesel is currently sold at a loss of Rs 9.90 per litre. It could take over one-and-half years to wipe out the Rs 9.9 a litre loss at the current rate of raising diesel price every month by 50 paise per litre.
The total under-recoveries, or revenue loss, on diesel and cooking fuel (LPG and kerosene) could be around Rs 147,500 crore, which could lead to the government exceeding the budgeted Rs 65,000 crore for total fuel subsidy burden for 2013-14 fiscal.
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