No diesel price hike for now, says Moily - Times of India

The author has posted comments on this articleTNN | Sep 25, 2013, 05.12AM IST

NEW DELHI: The business of politics appears to be clouding M Veerappa Moily's efforts to lighten government's financial burden by reforming fuel pricing. The oil minister is considering reversing a decision that forced state transport utilities and other bulk consumers to pay market price for diesel and ruling out any plan to raise fuel prices for now.

"Oil companies have reported that the dual price mechanism is not working since state bus fleets are taking fuel from petrol pumps hindering smooth functioning of retail outlets and wasting fuel in the process," Moily told reporters, while launching a conservation campaign. "We will consider allowing state fleets to purchase diesel at the subsidized price in view of the need to encourage public transport but this would be subject to their active cooperat ion in our conservation campaign."

Moily also said his ministry had not moved any proposal for the Cabinet to raise price of diesel by Rs 3-5 a litre and cooking gas by Rs 50 a cylinder to cut subsidy bill. "We are working on other alternatives to reduce under-recoveries ... If you ask me today, there is no proposal. But we live in a dynamic environment."

The Supreme Court recently upheld the government's decision asking bulk consumers to pay market rate for diesel.

The court had said subsidies cannot continue forever and ultimately the economy has to survive. Even economists and industry analysts say that pricing reforms are the best way to promote conservation. There's no better indicator of this than the ministry's conservation campaign, which is more like a Rs 20-crore annual ritual.

Years of campaign have failed to moderate diesel demand growth as subsidy keeps prices artificially low and does not prompt consumers to be more careful. Cooking gas consumption, in contrast, has dropped due to the annual cap on the number of subsidized cylinders, forcing consumers to be more careful.

State transport utilities have been protesting soon after the mark et pricing policy for bulk consumers of diesel was implemented in January. At current rate, the utilities pay Rs 14.50 a litre more than what diesel costs at retail outlets. This has pushed up their losses in the absence of a commensurate tariff hike.

That is why Moily's statements on raising fuel prices and the timing of his move to withdraw dual pricing are dead giveaways of UPA managers developing cold feet for fear of adverse political fallout in poll-bound states such as Rajasthan and Delhi.

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