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Govt. deregulates Diesel also!

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Government agrees in-principle to free diesel prices: Finance Ministry

NEW DELHI: The government on Tuesday said it has agreed in-principle to deregulate diesel prices' date=' but is not considering similar proposal for the cooking gas.

"Government has, in principle, agreed to make the prices of diesel market determined," Minister of State for Finance Namo Narain Meena said in a written reply to the Rajya Sabha.

While petrol prices are market-linked, the government fixes the rates of LPG, kerosene and diesel, which results in a large budgetary expenditure on subsidies.

"There is no proposal at present to fully deregulate cooking gas price," Meena said.

He said the government continues to fix the price of diesel in order to shield the common man from the impact of rising crude oil prices and the resultant inflation.

"In order to insulate the common man from the impact of rise in international oil prices and the domestic inflationary conditions, the government continues to modulate the retail selling price of diesel," Meena added.

Global crude oil prices have surged since the beginning of 2012 on account of geo-political concerns in the Middle East and abundant global liquidity. The price of Brent crude rose to $120 a barrel in mid-April from $111 in January.

For the current fiscal, the government has made a provision of Rs 43,580 crore for oil subsidies, of which Rs 40,000 crore has been earmarked as compensation to oil marketing companies (OMCs) for selling petroleum products at lower than market rates.

During the 2011-12 fiscal, the government has paid Rs 65,000 crore to OMCs on account of under-recoveries, of which Rs 20,000 crore alone was for the January-March quarter.

High subsidies are putting pressure on the country's fiscal deficit, which touched 5.9 per cent of GDP last fiscal and is pegged at 5.1 per cent in 2012-13. India imports about 80 per cent of its crude oil requirement.

The government targets to bring down the subsidy bill to below 2 per cent of GDP this fiscal and 1.75 per cent in the subsequent years.


The decontrol, is apparently partial. basically for every hike, everything will remain fluid so as to pass least possible burden to the consumer. So there would be tax reforms, that would vary the tax rate as per price. What is also being suggested is a tax that is fixed per liter every quarter.

Anyways, this is bound to restore balance to the market in sometime, maybe a period of 6 months or so.

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This thing is most unlikely to happen. This is India, which is driven by Diesel. Every Rupee rise in Diesel will shoot up inflation, followed by bus/lorry strikes.


If this Happens,


All major car makers, viz MSIL, HMIL,.. etc are planning big investment for Diesel, when this happen, all these projects will be scrapped.


But one good thing will be, the prices of Diesel will come to its real worth and the original Diesel lovers( torque ) lovers would end up having their cars much cheaper.


Ford & Fiat can bring in their latest Petrol Tech.


Honda will shelve its dieselization plans.


Tata will be the most hit, with almost 90+% sold as Diesels, its customers would flock Japanese doors.

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This has happened. India was going in a deep crisis with risk of falling of its credit ratings, ratings of oil refiners. Check Google News, this not a mere speculation, but a statement from finance ministry.

If India's credit rating fell, they would be in much more trouble than inflation.

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Inevitable, had to happen. Overall below-par governance & the rut of corruption had to take its toll. Govt. should have prolonged it till was able to offer an alternative solution. I still do not see any push towards Renewable source technologies.


OIL is NOT well!
BornFree2012-04-24 13:47:52

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I agree with BornFree....this central govt is not even scoring passing mark out of 100. Even today when I was watching CNN-IBN, a fresh scam caught in my eye - "350 Cr. Chopper Scam".

Now, it looks like the only duties of this govt are to increase inflation to whatever level they can manage, increase petrol/diesel, LPG prices so that Indians again start using bullock-cart and when elections are door next - increase DA rates to govt employees and make false claims in front of farmers to get the votes

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Transportation prices in Mumbai have gone up. First the rickshaws have become pricey, and now bus fares have gone up too- notably, some routes are almost twice as expensive as two years ago!

I wonder what action the Goa government will take. While petrol prices going up, either due to governance issues at New Delhi or Oil Marketing Companies begging again, they actually brought down petrol prices. As of now, petrolheads do watch developments in Goa occasionally.

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If the state governments bring down the taxes on petrol , petrol products... our lives would be much simpler.


Here is the breakdown of the taxes charged by the government in various forms. From the time it is refined to the time it reaches the consumers.

  1. Excise duty : 14.35 rupees per liter (old estimates)
  2. Customs duty : 7.5 percent
  3. Sales tax or VAT : 20 percent.

so all in all a 45 % increase in the cost of petrol.

Under recoveries in High Speed Diesel are at 13.91 rupees per liter (as on 1 May 2012)


So the maximum the diesel prices go up will have to be in this region.

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