JOIN USBe ready to shell out more for cooking gas and diesel as the government is contemplating pruning oil subsidy soon after the July 19 Presidential election.
Senior officials from the ministry of finance and petroleum has reached a conclusion that reduction of subsidy has become an utmost necessity in the wake of rising fiscal and current account deficits.
Official sources said that the outcome of this meeting that took place on Friday will be put forward to the prime minister, who will take a final call.
Soon after taking over the finance ministry, Prime Minister Manmohan Singh had held a meeting of senior officials and asked them to prepare the roadmap on fuel sector reforms, which has been necessitated in the wake of rising import of crude oil and the fall in rupee.
PMO taking active steps
Highly placed sources also said that the Prime Minister’s Office (PMO) is actively working out measures to guide the oil sector out of the policy inertia and whimsical pricing of fuel, which has thrown government’s fiscal balance out of gear.
Experts say that India’s oil import bill, which is nearly 30 per cent of the current account deficit, is largely due to the fiscal policy choice that subsidises fuel and helps encourage its demand.
“Now that the prime minister is in charge of finance ministry, he will not allow things to go out of control,” they said, adding a decision on diesel price hike could take place in order to reduce government’s rising subsidy bill.
LPG (cooking gas) and kerosene oil prices will also see some upward movement. “Although it is difficult to keep diesel prices off government’s control, steps to rationalise prices of subsidised fuel and narrow the price difference between diesel and petrol will be a welcome step,” said an oil expert.
Currently, the pump price of petrol is Rs 30 more than that of diesel.
Diesel prices have not been revised since July 2011 and this is one of the reasons diesel is being increasingly preferred by car-owners and even by industries.