The government today took a bold step towards reform by allowing for the partial de-control of fuel prices. Starting midnight tonight petrol prices will be market linked. That amounts to Rs 3.50 hike per litre of petrol - a 6.7% increase. Diesel prices will also be de-regulated, but over time. For now they have been hiked by Rs 2 rupees a litre - that's a 5% increase.
The Empowered Group of Ministers also announced that LPG prices will be hiked by Rs 35 per cylinder and kerosene prices are up by Rs 3 per litre. Though both cooking fuel prices will continue to be administered, analysts estimate these price hikes will reduce underrecoveries from Rs 77,000 crore to Rs 53,000 crore. This means many of the key recommendations of the Kirit Parikh Committee have been accepted, except for the complete de-regulation of diesel prices.
However, the big question on everyone's minds is when will the government align diesel prices to international market prices? When asked Oil Secretary S Sundareshansaid, “We have not taken a final decision on that. Let's see how things go.”
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