The Indian Government is mulling over a plan to increase diesel and kerosene prices, with an aim to cut down on its fiscal deficit. A hike of Re 1 each month over 10 months is expected. Previously, the Government increased diesel rates by 14 per cent in September 2012 for reducing burdens due to fuel subsidies.
Diesel prices were left unchanged for a period of 14 months. As per statistical data from the government, India's three state-run fuel retailers lose Rs. 9.28 rupees per litre of diesel and Rs. 31 rupees per litre kerosene. The current price of diesel is Rs. 47.15 per litre in New Delhi. Though inflation has come down due to subsidies at 7.24 per cent in November 2012, India has a budget deficit which is 5.3 per cent of the GDP (Gross Domestic Product) up to the end of FY 2012-13. This deficit is largely due to food, fuel and fertilizer subsidies.
To keep the budget deficit down, the Government has been forced to reduce spending on infrastructure and social development. Since more than half a dozen states are going for polls in 2013, this move to raise prices would be tough, as per analysts. It also might bring down the standing that Congress enjoys in several states, as general elections would be held in 2014.
On 27th December, Prime Minister Manmohan Singh emphasized a need to correct the pricing of energy and suggested gradual price adjustments while inaugurating the National Development Council meeting. However, the Prime Minister clearly stated that no immediate action would be taken. Commenting on the possible increase, Planning Commission member BK Chaturvedi said,” That (increase in price) will be decided by the government after reaching a political consensus on the issue."
