Assembly poll results may not halt diesel hike

New Delhi: The poor showing by the Congress in the four assembly elections may not impact the government’s decision towards diesel deregulation, according to economists.

Congress president Sonia Gandhi on Sunday had accepted that price rise was one of the reason for poor performance of Congress in the assembly elections.

“The monthly increase of 50 paise per litre in diesel prices will continue. But one-time big hike in diesel prices as recommended by the expert group under  former Planning Commission member Kirit Parikh is unlikely,” said Sunil Kumar Sinha, director (public finance), India Ratings and Research. He said that subsidy for oil sector will be more than the budgeted amount.

Sinha said that the government will like to speed up some of the reforms to shore up the economy, so that it has something to show to the electorate in the Lok Sabha elections next year.
The expert group under Parikh had recommended an immediate hike of Rs 5 per litre in diesel, Rs 250 on subsidised domestic LPG cylinder and Rs 4 per litre on kerosene.

In November, petroleum minister M. Veerappa Moily had said that diesel prices will be der-egulated in six months with gradual price increases.

In January, the Union Cabinet had allowed oil companies to increase diesel prices by 40 to 50 paise a litre every month until under-recovery on its sale is fully eliminated. 

“I believe that the Centre would want the losses on diesel to come down so that it is able to contain the fiscal deficit. This is because not meeting the deficit will have its own adverse economic reactions, which the government will like to avoid in an election year,” said an economist.