Diesel price hike for bulk consumers to push up rail, road fares, cement costs

The price of non-subsidised cooking gas (LPG) was on Friday hiked by Rs 46.50 per cylinder as part of reform measures unleashed by the government to trim its huge fuel subsidy bill. Photo: H. Vibhu

A hike of nearly Rs. 10 a litre for the bulk diesel consumers that includes the railways, transport undertakings and the defence, cement, mines and power sectors will trigger an all-round hike in public transport costs, rail fares, cost of cement and other infrastructure related activity across the country.

The oil marketing companies (OMCs) have also quietly raised the price of the domestic non-subsidised LPG cylinder by Rs. 46.50 paise, a move that is likely to impact those who consume more than nine cylinders a year.

Indian Oil Corporation (IOC) announced that for the bulk diesel consumers taking supplies directly from the installations of the OMCs, no subsidy shall be available and the price shall be non-subsidised market determined price. Accordingly, the price for these consumers shall stand increased by Rs.9.25 a litre. This is likely to result in an annual subsidy saving of Rs. 12,907 crore for the OMCs.

The impact of the price hike will be that under recoveries on diesel, both bulk and retail, shall decrease by around Rs. 3400 crore till March 2013. Based on the current prices and volumes, the decrease in the under-recoveries on an annual basis will be around Rs.15, 000 crore for the OMCs.

In the case of the hike in the price of the domestic 14.2 kg non-subsidised LPG cylinder by Rs. 46.50 paise, it will be over and above five subsidised cylinders that consumers are entitled during 2012-13.

Interestingly, the OMCs last hiked the price of non-subsidised LPG by Rs. 26.50 on November 1, but had to roll it back within hours following an outcry from the Opposition parties, within the ruling coalition and people at large.

Now a subsidised cylinder will be available in Delhi for Rs. 410.50. A non-subsidised cylinder’s price will cost Rs. 942.

The increase in under-recovery on account of the increase in subsidised LPG cylinder will be Rs. 5200 crore for the OMCs till March 2013. Based on volume and current prices, the increase in under-recoveries on an annual basis shall be Rs.10,000 crore for the OMCs.

The government has quietly sugar-coated the hike in the price of non-subsidised cylinders with a raise in the cap of subsidised cylinders to nine from six to prevent any backlash from political parties.