The Tamil Nadu government will maintain diesel subsidy to State Transport Undertakings at Rs.500 crore in 2014-15, though there are no signs of the Centre taking back the authorisation it gave over a year ago to national oil marketing companies to increase in small doses the fuel prices every month.
Such subsidy as a measure to compensate for the soaring fuel costs – since January 17 last year the cost of a litre of diesel in Chennai has gone up by almost Rs.8 – is the only option available for the State government to keep the fleet of the transport undertakings on the road without resorting to a fare increase.
An announcement regarding the diesel subsidy was made by Finance Minister O.Panneerselvam, while presenting the Budget for 2014-15. Noting that the incessant increase in the price of diesel put an unprecedented financial burden on the STUs, he said in the current financial year, apart from a Rs.500 crore subsidy, Rs.350 crore was provided as share capital support.
Finance Secretary K.Shanmugam, in a post-budget interaction with presspersons, listed diesel subsidy as a major component of subsidy burden for the State government.
Apart from authorising oil marketing companies, the Centre had in January last year introduced dual pricing for diesel under which bulk consumers such as transport undertakings, railways and industrial units have to pay a higher, non-subsidised price. In Chennai, while the diesel sold at retail outlets costs Rs.58.56 a litre, bulk consumers, who are supplied at their locations, have to pay Rs.11 more per litre.
Notwithstanding the dual pricing system, buses of the STUs, according to oil industry sources, fill diesel at retail outlets. Since they are like any other cash and carry customer, the oil companies are not complaining. A few months ago, there were indications of the Union Petroleum Ministry considering allowing STU buses to fill fuel at retail outlets, but little is known about the proposal.
