Expert group moots partial increase in kerosene, LPG rates and moving towards market-determined prices in two to three years
Reuters
New Delhi: Diesel prices may go up after the Kirit Parikh Committee recommended the rates should be immediately hiked by Rs 4-5 per litre, while favouring continuation of existing pricing principles for controlled petroleum products.
The expert group, which was asked to suggest a methodology for pricing of diesel and cooking fuel, will submit its report on Wednesday.
Sources said the committee has suggested that trade parity pricing formula for diesel, kerosene and cooking gas (LPG) be retained.
It suggested an increase in its retail price by Rs. 4-5 per litre immediately and the remaining subsidy recovered from consumers through a monthly price hike of Re 1 per litre or oil companies be paid a fixed subsidy of Rs. 6 per litre.
The government is looking to alter the way diesel and cooking fuels are priced to reduce its subsidy burden, which appears to be spiralling out of hand.
Since the last fiscal, the Finance Ministry has pushed for refiners to be paid the equivalent of rates they would have realised if diesel, kerosene and LPG were exported.
A departure from the import parity price (import price plus duties and transportation) mechanism would have shaved off Rs. 17,618 crore from last fiscal's Rs. 1,61,029 crore subsidy bill.
Sources said the panel has declined the Finance Ministry's demand for doing away with import parity pricing of diesel, kerosene and cooking gas or LPG (Liquefied Petroleum Gas).
The committee favoured partial increase in kerosene and LPG rates and moving towards market-determined prices in two to three years.
Currently, diesel is priced at trade parity, of which 80 per cent is import price and 20 per cent export rate. Kerosene and LPG are priced at import parity.
The Finance Ministry wanted export parity pricing for diesel and kerosene in 2012-13 and wanted LPG to be priced through a 60-40 mix of export and import parity rates.
Sources said a shift to export parity pricing would have cut the subsidy on diesel by Rs. 14,372 crore to Rs. 77,689 crore in 2012-13. Another Rs 2,245 crore would have been saved on LPG and Rs. 1,001 crore on kerosene during the period.
The savings would come from the removal of import duty and notional transportation cost in the import parity price.
For the current fiscal, the total subsidy for selling diesel, kerosene and LPG at rates below cost was put at Rs. 80,000 crore in April but has now climbed to around Rs. 130,000 crore due to the rupee volatility against the dollar.
Currently, diesel is priced at trade parity, of which 80 per cent is import price and 20 per cent export rate. Kerosene and LPG are priced at import parity.
The Finance Ministry wanted export parity pricing for diesel and kerosene in 2012-13 and wanted LPG to be priced through a 60-40 mix of export and import parity rates.
Sources said a shift to export parity pricing would have cut the subsidy on diesel by Rs. 14,372 crore to Rs. 77,689 crore in 2012-13. Another Rs 2,245 crore would have been saved on LPG and Rs. 1,001 crore on kerosene during the period.
The savings would come from the removal of import duty and notional transportation cost in the import parity price.
For the current fiscal, the total subsidy for selling diesel, kerosene and LPG at rates below cost was put at Rs. 80,000 crore in April but has now climbed to around Rs. 130,000 crore due to the rupee volatility against the dollar.
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