LPG consumers to get five subsidised cylinders till March 31
New Delhi: In a bold reforms decision, the government on Thursday partially deregulated diesel price allowing a hike of 50 paise a litre per month for retail customers and nearly Rs 11 for bulk consumers, a step that is feared will have a cascading effect on inflation.
In a bid to sweeten the bitter pill, the Cabinet Committee on Political Affairs chaired by Prime Minister Dr Manmohan Singh raised the cap on subsidised LPG to nine cylinders per household from six, bowing to public pressure.
State-owned oil companies in a parallel move will cut petrol price by 25 paise per litre in view of softening in cost of raw material.
The decision on diesel is expected to cut the subsidy bill by Rs 12,900 crore on account of hike in price of fuel sold to bulk consumers like Railways and state transport undertakings. Diesel accounts for 59 per cent of the estimated Rs 160,000 crore fuel subsidy bill in 2012-13.
An order issued by the Oil Ministry post CCPA decision stated that bulk users be charged market price, that will result in a hike of Rs 10.81 per litre over and above the current rate of Rs 47.15 in Delhi.
The government is expected to save about Rs 9,000 crore of raise in price for retail buyers.
Finance Minister P Chidambaram maintained that the oil companies have been allowed to make ‘small correction from time to time’.
“I am not factoring in at this moment (the price rise). I am proceeding on the basis that the subsidy bill remains the same (as earlier),” he said.
Opposition parties and allies like Samajwadi Party slammed the government’s decision on diesel calling it deregulation. Demanding a rollback, they said the decision to allow periodic hike in diesel prices would have an alround spiralling effect on commodity prices and transportation cost.
They were not impressed by the decision to raise the cap on LPG cylinder calling it is a political gimmicks.
Price of diesel, which was last revised on September 14 when it was hiked by a steep Rs 5.63 per litre, would be raised in small dozes of 40-50 paise, excluding local levies like VAT, every month to make up for the whopping Rs 96,000 crore loss at current rates.
However, LPG and kerosene rates will not be changed. There are indications that price of non-subsidised LPG, which has been frozen in November, will be allowed to come up to market levels.
Moily said the CCPA decided to raised the cap on supply of subsidised LPG from 6 to 9 cylinders of 14.2-kg each for every household in a year.
Subsidised LPG costs Rs 410.50 per 14.2-kg cylinder and any household requirement beyond the new cap of 9 cylinders is to be bought at near market price of Rs 895.50 per bottle.
After Thursday’s decision, consumers will get 5 subsidised cylinder instead of 3 in the period till March 31, 2013. From April 1, 2013 they will get 9 cylinders in a year.
The increase in cap would mean an additional subsidy outgo of Rs 9,300 crore annually. (PTI)