New government may deregulate diesel in the upcoming budget

The new government has been taking some very important steps in the last few days to revive the Indian economy. Some decisions have been encouraged whereas few have raised eyebrows.  But there is that one major decision which could change the Indian economy in a big way. The matter in question is regarding diesel prices.

The government may deregulate the diesel prices in the next month’s budget as the oil ministry is preparing a fresh proposal, for the same, to be submitted to the cabinet soon. The government is expecting the revenue losses on the fuel to drop to a projected record low of 1.65 per litre by June 15 and this, they hope, will provide an opportunity to reduce the annual Rs 1,40,000-crore fuel subsidy burden.

Fuel subsidy in 2013-2014 was about Rs 1,40,000 crore whereas diesel accounted for over Rs 62,800 crore. The previous government was responsible of the announcement of 50 paise increase in diesel price every month, in order to reduce the fuel bill. This worked to an extent and now the diesel price sits pretty close to petrol. However, the sales of petrol cars have also picked up drastically in the last few months.

"The oil ministry is preparing a fresh proposal for the Cabinet. The previous government's plan of a one-time price hike of 6 per litre is now not required as revenue losses on the fuel is substantially low," an official said, requesting anonymity. "If the Cabinet gives its go-ahead, diesel deregulation could be announced in the next month's budget," said a government official to ET.

But there are many cons if the diesel is deregulated, with the obvious one being the rise in inflation. Each and every industry will increase the price due to the hike in transportation cost and what all these industries may do is, pass on this cost to us - the consumers.