The Cabinet Committee on Political Affairs (CCPA) on Thursday raised the cap on supply of subsidised LPG cylinders to nine bottles from six per year per household and authorised the oil marketing companies (OMCs) to undertake periodical hike in diesel prices till the Rs. 9.60 paise per litre subsidy is completely wiped out.

However, the CCPA did not take any decision on the proposal of the Petroleum Ministry to hike LPG cylinder prices by around Rs. 50 immediately and then in a phased manner over the next two years to wipe out the nearly Rs. 500 per cylinder subsidy. It also decided not to go with the Petroleum Ministry proposal to hike kerosene oil prices in a phased manner leaving both the commodities of mass consumption untouched.

The CCPA, that met under the leadership of Prime Minister Manmohan Singh, virtually announced the “deregulation’’ of diesel prices thereby authorising the OMCs to hike diesel prices over a period of time to cover up the Rs. 9.60 paise per litre loss being incurred by them. However, Petroleum and Natural Gas Minister, Veerappa Moily refused to share the details or formula for a phased price hike in diesel prices. The Cabinet decision came on the note submitted by the Petroleum Ministry based on the recommendations of the Kelkar Committee which had called for an end to the subsidy regime in the petroleum sector by 2015-16.

As soon as the Cabinet decision came, the marketing departments of the OMCs got down to the business of calculating the proposed hike that is likely to take effect tonight. “We are still awaiting the notification from the government before deciding on the quantum of hike. We have been given a brief on the issue and indirectly we will have to take the consent of the Petroleum Ministry before undertaking any kind of hike in diesel prices,” a senior OMC official said.

Mr. Moily said there will be no change in LPG and kerosene rates. “I am happy to inform the CCPA has decided to raise the cap on subsidised LPG to nine cylinders per household per year from existing six cylinders. Consumers will get a quota of five subsidised cylinders between September 2012 and March 2013 and from April 1, 2013, they will be entitled to nine cylinders per annum.. As far as diesel is concerned, oil marketing companies have been authorised to make price correction from time to time. The price correction could take place commence even from tonight,’’ he added.

But it was left to the Finance Minister P. Chidambaram to clarify the situation and he maintained that the OMCs have been allowed to make `small correction’. “I am looking at same subsidy bill as was expected earlier,’’ he said.

Price of diesel was last revised on September 14 when it was hiked by a steep Rs. 5.63 per litre. At present, diesel costs Rs 47.15 per litre in Delhi. Subsidised LPG costs Rs. 410.50 per 14.2-kg cylinder and any household requirement beyond the new limit of 9 cylinders will cost a near market price of Rs. 895.50 per bottle. The government had in September capped the supply of subsidised cooking gas to six cylinders per household in a year, with a view to checking diversion to unintended

beneficiaries. The increase in the LPG cap would mean an additional subsidy outgo of Rs. 9,300 crore annually.

Petroleum Secretary G. C. Chaturvedi said CCPA has authorised oil firms to make small changes over a period of time. “There was no discussion on the quantum of price increase or the period over which these changes are to be effected. It has been left to the oil companies,’’ he said.

However, he hastened to add that the government had not de-regulated the diesel prices. ``If we are to deregulate, then diesel price will have to be raised by Rs 9.60 per litre, which is not the case. Only a small quantum of change has been permitted over a period of time. It cannot even be called partial deregulation,’’ he added.

State-owned oil companies sell diesel at a loss of Rs. 9.60 per litre, kerosene at Rs. 30.64 a litre and LPG at Rs. 490.50 per 14.2-kg cylinder. For the full 2012-13 fiscal, they are projected to lose about Rs. 165,000 crore.

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