The Kirit Parikh Committee on fuel pricing Wednesday recommended an immediate increase in diesel price by Rs.5 a litre to offset the loss incurred by state oil marketing companies (OMCs) in selling below cost.
In its report submitted to the petroleum ministry here, the committee suggested that the balance loss should be met through a fixed subsidy of Rs.6 per litre to the OMCs.
The panel has also suggested increasing kerosene prices by Rs.4 a litre, and a cap on subsidised domestic LPG to be restricted for each household to six cylinders per year. The panel was constituted to recommend a pricing methodology for diesel, domestic LPG and kerosene sale through the public distribution system.
In its draft report, the panel said that until diesel pricing was made market determined, the existing pricing mechanism based on trade parity should continue.
It felt that changing the existing pricing formula would not solve the problem of increasing losses, because of high international crude prices and rupee depreciation.
OMCs have been allowed by the government to increase diesel prices by 45-50 paise a litre every month.