The Modi government is examining whether to completely decontrol diesel prices, paving the way for private companies including Reliance and Essar to resume retail operations that they had shut 12 years back.
The decision would be taken by the Union Cabinet, a senior Finance Ministry source told The Hindu .
Some private retailers met Oil Minister Dharmendra Pradhan demanding that the government give up “control” over diesel pricing and end subsidies as in the case of petrol sales by the public sector oil retailers.
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The government-owned oil companies retail petrol at market-determined prices with negligible subsidy. The government can, however, “influence” oil public sector units to soften the impact of sudden sharp rises in the cost of global crude on retail prices.
The case for diesel decontrol is also borne out by the subsidy element in current retail prices having dropped to zero. Public sector retailers have since early 2013 hiked by Rs. 0.50 every month retail diesel prices in line with a decision of the United Progressive Alliance government. Over the past 10 days or so, retail diesel prices have been on par with market-determined prices.
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In the budget he presented on July 10, Union Finance Minister Arun Jaitley had proposed complete diesel decontrol before March 2015 by when the Finance Ministry estimated that the gap between the administered and market prices would be completely eliminated. “Now, instead of under-recoveries, the public sector oil retailers are reporting over-recoveries,” the source said.
The consideration delaying the go-ahead for diesel decontrol is that after private companies do re-enter the fuel retail business how would the government cushion consumers against sharp global crude price spurts.