The Government-appointed Kirit Parikh Committee has recommended a price increase of Rs. 5 per litre in diesel, Rs. 4 per litre in kerosene, and Rs. 250 in LPG cylinder with immediate effect.
It has also recommended that the subsidised LPG cylinders be reduced from the present nine to six cylinders per annum to each household. It has pitched for capping the subsidy on diesel at Rs. 6 per litre. At the same time, it has called for the elimination of subsidy on diesel within one year, which could save the exchequer Rs. 72,000 crore in fuel subsidy.
Mr. Parikh submitted the report to Petroleum and Natural Gas Minister Veerappa Moily here on Wednesday.
The Kirit Parikh panel was set up by the Petroleum and Natural Gas Ministry to suggest a methodology for pricing of diesel and cooking fuel.
The panel has said that the Government should take steps to pass on the impact of rise in price of diesel to consumers, and move rapidly towards making the price of diesel market-determined. "The expert group recommends that in view of high under-recovery of Rs. 10.51 per litre on diesel, HSD prices be raised by Rs. 5 per litre with immediate effect. The balance under-recovery should be made up through a subsidy of Rs. 6 per litre to public sector oil marketing companies (OMCs). The subsidy on diesel should be capped at Rs. 6 per litre litre. This will imply freeing of price of diesel beyond this cap," the panel has said.
If the gap falls below Rs. 6 per litre, either the prices should be reduced or the subsidy to be provided should be reduced. In future, OMCs should be permitted to revise the prices above the subsidy cap on their own. The fixed subsidy of Rs. 6 per litre be reduced gradually, and finally removed through regular revisions over the next one year, it has said.
The committee is of the view that the PDS kerosene price should be comparable to diesel price to prevent diversion and adulteration. "This can be accomplished if PDS kerosene is priced at full market price, and the benefit of the subsidy to the deserving consumers i.e. BPL families, is given through direct cash transfer mechanism. The direct transfer of subsidy to BPL families country-wide should be fast-tracked, and completed within the next two years. Till this is implemented, price of kerosene should be increased by Rs. 4 per litre immediately, and thereafter be revised from time to time at least in line with growth in the per capita agriculture GDP," it has said.
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