Terming it a landmark, Credit Analysis and Research (CARE) Limited has called for the immediate implementation of the Kirit Parikh Committee report that has recommended freeing of petrol and diesel prices and a steep hike in LPG and kerosene rates. This was the key to cutting subsidies, it said.
“The government needs to strike a balance between reducing the subsidy burden on the public sector companies, reducing the fiscal deficit and managing the current inflationary scenario, given that the economy is in the process of revival and is attempting to restore its buoyancy,” CARE said in a statement here.
The experts group headed by the former Planning Commission member Kirit Parikh recommended freeing of petrol and diesel prices, while raising kerosene and domestic LPG rates by Rs. 6 per litre and Rs. 100 per cylinder respectively.
“The recommendations are positive, but implementation is the key. Complete deregulation of auto fuels and sharp hikes in the prices of cooking fuels would help the government in reducing fiscal deficit and thus curtail its borrowings,” CARE managing director and CEO D.R. Dogra said.
The move may, however, prompt private players like Reliance Industries Limited, Essar Oil and Shell to re-open their petrol pumps, putting pressure on the market share of state-owned firms. “In the past, the entry of private players in the retail fuel market had resulted in an erosion of 10 per cent in the market share of public sector retailers,” he said.
“Although the report is in line with the wish-list of most of the market participants, implementation of the recommendations needs to be keenly watched for,” CARE said.
The proposed hike in the prices of cooking fuels coupled with a 20 per cent reduction in allocation of kerosene under the Public Distribution System would reduce revenue loss by about Rs. 16,454 crore, whereas, the auto-fuel deregulation would avert Rs. 13,997 crore of under-recoveries. “The impact on the oil and gas industry, if any of the recommendations by the committee are implemented, will be extremely positive,” CARE said.
