ASSOCHAM Urges Government to Stop Subsidising Petrol and Diesel, ASSOCHAM Urges Government to Free Prices From Elimination of Subsidy, ASSOCHAM Wants to Stop Subsidising Petrol and Diesel

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SME Times News Bureau | 02 Jun, 2010
An industry body Tuesday urged the government to free prices of petrol from it's domain and consider phased wise elimination of subsidy on diesel to help oil companies stop bleeding whose losses on account of continued extension of subsidies on petrol, diesel, LPG and kerosene are likely to exceed Rs.1 lakh crore in current fiscal.

The Associated Chambers of Commerce and Industry (ASSOCHAM), in a representation submitted to Ministry of Petroleum and Natural Gas, said that petrol pricing can be completely be freed as most of it’s consumers can willy-nilly bear the burden and provide downstream oil sector with a relief of close to Rs.13,000 crore.

The government should take out diesel pricing from it’s control in phased manner since elimination of subsidies on diesel cannot be possible for government in one go as it happens to be a product of mass consumption and is largely consumed by people living on subsistence levels, it said.

"The richer lot of society should be charged higher prices and diesel consumption by rich farmers shouldn’t be subsidised," ASSOCHAM viewed.

It, however, added as far as kerosene and LPG are concerned, the government should continue to subsidise these fuel because their consumption is largely prevalent with masses belonging to restricted sources of income.

"LPG is going to be replaced by Compressed Natural Gas for cooking purposes. Therefore, the consumption of LPG would increase for poor people for which some extension of subsidies should continue until India becomes a country of affordable people. Likewise, subsidies on kerosene should also continue," ASSOCHAM said.

But, the same time, it viewed that LPG and kerosene pricing could also be taken out of state control for people above poverty line as their income levels are rising with changing consumption patterns and there would be no justification for subsidies for them as it can jeopardize prospects of oil companies.

"On account of heavy subsidies, petrol is currently sold off Rs.6 a liter below it’s actual price while diesel pricing is subsidized by little over Rs.7 a liter. There is a subsidy of close to Rs.300 per cylinder of LPG and it’s element on kerosene exceeds Rs.30 a liter," the industry body pointed out in its representation.

Since identification exercise for elimination of subsidies on diesel is going to take longer, the government should reduce it in a phased manner as fluctuation in future crude oil prices are unlikely to be abnormally higher, it added.

According to ASSOCHAM, crude prices are going to go in northern direction most of the times because of higher demand and it’s lesser production since most of economies are growing and growth of economies would largely depend on energy consumption patterns which will keep increasing.