Indian government deregulated petrol prices in 2010 in order to protect the fuel companies from huge losses. Today, petrol prices hover in the region of Rs 80.
Now, latest news reports from Economic Times suggest that the government is likely to deregulate diesel prices by December this year if global trend continues to remain as it is. There is also a possibility of reduction of subsidies cylinders provided by the government to cut fuel subsidies to achieve fiscal target placed by the finance minister.
Crisis in Iraq had caused Brent crude oil prices to shoot above USD 115 per barrel last month. However, the fears of supply disruption receded and the prices have come down to USD 107 per barrel.
A source told Economic Times, “As the government continues raising diesel prices by 50 paise per month, revenue losses on the fuel is expected to be around 2.50 a litre by the end of July. If the trend continues, diesel prices will be at par with the market by December.”
Another source inside the government added, “The finance minister has set a target and spelled out broad road map for diesel deregulation and cutting LPG subsidy. The government will take appropriate action in this regard after factoring inflation and global oil prices, which is now on a decline.”
The government is also likely to cut cooking gas subsidies with steps such as checking its diversion and reducing the number of subsidised cylinders. “With rising fuel subsidy, there is need to cap the subsidised cylinders at a more realistic level,” Jaitley said in the statement. Subsidy on the cooking gas in 2013-14 was 46,458 crore.
Deregulating diesel prices may result in rising of prices as we witnessed in case of petrol. This could also impact the sale of diesel cars in the future. Stay tuned into Motoroids for more updates on fuel pricing and news from the world of auto.
Source: ET Auto