Government mulls to remove subsidy on diesel

The Union Finance Minister Mr. Pranab Mukherji, in response to a debate on fuel price rise in Lok Sabha, stated that they would consider the opposition’s suggestion and try to work on a suitable mechanism to avoid subsidizing the diesel car owners. Apparently, the Indian Government provides a subsidy of Rs. 6.08 per litre on diesel cars, which consume about 15% of this fuel, while the Government is planning to lift the subsidy offered so far to the diesel vehicle owners to compensate for the losses incurred by the diesel, kerosene and LPG by the offering subsidies and the oil bonds.

While the Government has to consider all the other factors to control the country’s economy, they are forced to free the subsidies on diesel prices and LPG, but are likely to retain it on the kerosene, favouring the poor. The government bore the loss of Rs 49,000 crore per annum in order to diminish the impact of the fuel price hike on the common man. The Government has slashed down the customs and excise duties on petroleum products.

Mr Mukherji has informed that 10% percent of the total diesel consumption is used by the industry, 6 % of which is used by the railways and 12 % by the agricultural sector, 15 % by the car owners, 8 % of which is contributed towards the power generation, 12 % of which is pumped into the adding busses and 37 % into trucks. India is known to have been importing 75% of the crude oil requirements. Mr Mukherjee also added that the recent increase in the fuel prices did not bring down the under recoveries of the state owned oil companies from its Rs 1.22 lakh crore revenue.

The Janata Dal – U leader and NDA convener, Mr. Sharad Yadav is reported to have been the reason for the Governments decision in lifting the subsidies forwarded on diesel, which is greatly consumed by the luxury car owners, telecom tower companies , malls and restaurants. Mr Sharad Yadav seems to have questioned the Government on providing the subsidies on diesel, LPG and kerosene.