Congress core group meets to debate issue in the wake of burgeoning subsidy bill

Even as the Congress core group headed by Congress president Sonia Gandhi got down to debate the fuel price hike, Petroleum and Natural Gas Minister Veerappa Moily on Friday said the decision on hiking diesel and LPG prices would be taken “as quickly as possible”.

A decision on increasing the supply of subsidised cylinders from six to nine per household a year would also be taken soon, he told journalists.

The urgency to raise prices comes in wake of the fuel subsidy burgeoning to nearly Rs. 1,60,000 crore during 2012-13.

Asked about the proposals sent by his Ministry to the Cabinet Committee on Political Affairs, Mr. Moily said: “When the decision is taken, you will be the first to know. The Kelkar Committee recommendations are under serious consideration.” The Ministry’s proposals are reportedly based on recommendations of the Vijay Kelkar Committee, which was appointed by the Finance Ministry to suggest a road map for fiscal consolidation.

The Kelkar panel had recommended an immediate hike in the price of diesel by Rs. 4 a litre, kerosene by Rs. 2 a litre and LPG by Rs. 50 per cylinder. Thereafter, it suggested raising the rates in a phased manner over the next two to five years or till the time the subsidy component on diesel, LPG and kerosene is wiped out.

The Petroleum Ministry’s fast tracking of fuel price hike comes in the wake of the Finance Ministry’s refusal to bear the additional subsidy arising out of the proposed increase in subsidised cylinders from six to nine a year.

To compensate for this, the Petroleum Ministry has proposed a hike of Rs. 100 per LPG cylinder in two instalments to partially make up for the Rs. 490.50 per bottle loss being incurred currently. The Ministry has, in its proposals, recommended a quarterly hike of Rs. 50 per cylinder from April till the entire losses are wiped out.

On diesel, it has proposed a Rs. 3-4.50 per litre hike at one go monthly instalments of Re. 1 or Rs. 1.50 per litre. From April, it wanted Re. 1 a litre increase every month till such time the current loss of Rs. 9 is wiped out. It has also proposed raising kerosene price by 35 paise a litre per month or one rupee a litre per quarter till March 2015.

The price of diesel was revised on September 14 and it currently costs Rs. 47.15 per litre in Delhi.

Kerosene rate has not changed since June 2011 and it currently is Rs. 14.79 per litre in Delhi.

Subsidised LPG costs Rs. 410.50 per 14.2-kg cylinder and any household requirement beyond the current cap of 6 cylinders is to be bought at the near-market price of Rs. 895.50 per bottle.

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