After food inflation, it is the turn of motor fuels to burn a bigger hole in your pocket. Govt may increase prices of petrol and diesel by Rs 3 and Rs 1 respectively during the budget session.
A panel under former Planning Commission member Kirit Parikh, set up to review the petro pricing regime, on Wednesday set the stage for the hike, recommending removal of controls over petrol and diesel prices, raising cooking gas price by Rs 100 per cylinder and kerosene by Rs 6 a litre.
I don’t think government will accept the recommendation given the food inflation hovering around 16.81%. and according to report small hike in price of LPG cylinder will be done in phase manner.
The main factor forcing the government’s hands is the rising deficit and the cost of the economic stimulus, farm support prices and social sector spending. With hope of significant inflows have been dashed now that the auction of 3G radio spectrum is not happening this fiscal. And whatever is to flow in from follow-on sell-off in NTPC will go towards bridging the deficit. All other offerings will be in the next fiscal. That leaves little scope for subsidizing motor fuels.
Parikh’s panel prescription has been deregulation of petrol, diesel prices to promote competition, equitable sharing of inflation burden LPG, kerosene prices can be raised every year in step with growth in per capita agricultural GDP at nominal rates and per capita income respectively Transparent and effective distribution system for PDS kerosene and domestic LPG through smart cards.
Though I support government move to free oil and gas from government subsidies. With surmounting fiscal deficit is around 9-10% of GDP if we include oil subsidies, fertilizer subsidies, and local government subsidies. Similarly, India had a debt to GDP ratio of 90 per cent, while most other emerging economies, including all competitors in Asia, managed to keep it well below the 50 per cent mark.
Without any increase, Indian Oil , Bharat Petroleum and Hindustan Petroleum are estimated to lose Rs 46,030 crore (Rs 460.30 billion) in revenues this fiscal. As per the current policy, the revenue loss on petrol and diesel is met by upstream firms like ONGC. Of the Rs 31,574-crore (Rs 315.74 billion) revenue loss expected on LPG and kerosene, the government has so far given Rs 12,000 crore (Rs 120 billion).
Freeing auto fuel prices, which would promote competition as the present policy has virtually driven private sector out of businesses. This is also a good time to free price because petrol and diesel prices as increase will be very low.
