Seeking to set a roadmap for reforms in the petroleum sector and systematically eliminate subsidies, the government appointed Kirit Parikh Committee on Wednesday strongly recommended an increase of Rs. 5 per litre in price of diesel, a Rs. 4 per litre in kerosene and Rs. 250 increase in LPG cylinder with immediate effect.
It also recommended that the limit for subsidised LPG cylinders be reduced from present 9 to 6 cylinders per annum to each household. It also has pitched for capping the subsidy on diesel at Rs. 6 per litre while giving a call for elimination of subsidy on diesel within one year which could save the exchequer Rs. 72,000 crore in fuel subsidy, Mr. Parikh told reporters while submitting the report to Petroleum and Natural Gas Minister, Veerappa Moily here.
However, the recommendations of the panel are unlikely to be implemented as the proposals will have to be endorsed by the Union Cabinet. With Assembly elections in five States scheduled in the next two months, it is unlikely that the report will see the light of the day any time soon. The Kirit Parikh panel was set up by the Petroleum and Natural Gas Ministry to suggest a methodology for pricing of diesel and cooking fuel.
Stating that government has already decided to eventually free diesel price, it said Government should take steps to pass on the impact of rise in price of diesel to consumers and move rapidly towards making the price of diesel market determined. ``The expert group recommends that in view of high under-recovery of Rs. 10.51 per litre on diesel, HSD prices raised by Rs. 5.00 per litre with immediate effect. The balance under-recovery should be made up through a subsidy of Rs. 6 per litre to public sector oil marketing companies (OMCs). The subsidy on diesel should be capped at Rs. 6 per litre litre. This would imply freeing of price of Diesel beyond this cap,’’ the report states.
It said if the gap falls below Rs. 6 per litre, either the prices should be reduced or the subsidy to be provided should be reduced. In the future, OMCs should be permitted to revise the prices above the subsidy cap on their own. The fixed subsidy of Rs. 6 per litre be reduced gradually and finally removed through regular revisions over the next one year, it states.
Similarly, it said PDS kerosene price should be comparable to diesel price to prevent diversion and adulteration. ``This can be accomplished if PDS kerosene is priced at full market price and the benefit of the subsidy to the deserving consumers i.e. BPL families, is given through direct cash transfer mechanism. ``The direct transfer of subsidy to BPL families country-wide should be fast-tracked and completed within the next two years. Till this is implemented, price of kerosene should be increased by Rs. 4 per litre immediately and thereafter be revised from time to time at least in line with growth in the per capita agriculture GDP.
In view of the Rs. 555.44 subsidy per LPG cylinder, the panel said the number of cylinders should be reduced from the present 9 to 6 cylinders. The price of LPG cylinder should be hiked by Rs. 250 immediately and the balance subsidy be phased out over the next 2 years through gradual price increase.
It also recommended that the limit for subsidised LPG cylinders be reduced from present 9 to 6 cylinders per annum to each household. It also has pitched for capping the subsidy on diesel at Rs. 6 per litre while giving a call for elimination of subsidy on diesel within one year which could save the exchequer Rs. 72,000 crore in fuel subsidy, Mr. Parikh told reporters while submitting the report to Petroleum and Natural Gas Minister, Veerappa Moily here.
However, the recommendations of the panel are unlikely to be implemented as the proposals will have to be endorsed by the Union Cabinet. With Assembly elections in five States scheduled in the next two months, it is unlikely that the report will see the light of the day any time soon. The Kirit Parikh panel was set up by the Petroleum and Natural Gas Ministry to suggest a methodology for pricing of diesel and cooking fuel.
Stating that government has already decided to eventually free diesel price, it said Government should take steps to pass on the impact of rise in price of diesel to consumers and move rapidly towards making the price of diesel market determined. ``The expert group recommends that in view of high under-recovery of Rs. 10.51 per litre on diesel, HSD prices raised by Rs. 5.00 per litre with immediate effect. The balance under-recovery should be made up through a subsidy of Rs. 6 per litre to public sector oil marketing companies (OMCs). The subsidy on diesel should be capped at Rs. 6 per litre litre. This would imply freeing of price of Diesel beyond this cap,’’ the report states.
It said if the gap falls below Rs. 6 per litre, either the prices should be reduced or the subsidy to be provided should be reduced. In the future, OMCs should be permitted to revise the prices above the subsidy cap on their own. The fixed subsidy of Rs. 6 per litre be reduced gradually and finally removed through regular revisions over the next one year, it states.
Similarly, it said PDS kerosene price should be comparable to diesel price to prevent diversion and adulteration. ``This can be accomplished if PDS kerosene is priced at full market price and the benefit of the subsidy to the deserving consumers i.e. BPL families, is given through direct cash transfer mechanism. ``The direct transfer of subsidy to BPL families country-wide should be fast-tracked and completed within the next two years. Till this is implemented, price of kerosene should be increased by Rs. 4 per litre immediately and thereafter be revised from time to time at least in line with growth in the per capita agriculture GDP.
In view of the Rs. 555.44 subsidy per LPG cylinder, the panel said the number of cylinders should be reduced from the present 9 to 6 cylinders. The price of LPG cylinder should be hiked by Rs. 250 immediately and the balance subsidy be phased out over the next 2 years through gradual price increase.
