PetroMin rules out decontrolling diesel pricing

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New Delhi, Jan 27 (PTI) With food inflation ruling atuncomfortable level, Petroleum Minister S Jaipal Reddy todayruled out freeing of diesel prices from government control,saying the move was not politically and practically feasible.

"It is not possible (just now)," he told reporters here.

Decontrol of diesel, as was decided by an Empowered Groupof Ministers (EGoM) in June last year, would mean up to Rs 7 alitre hike in the price of fuel that is used in transportsector and has direct bearing on food and general inflation.

With food inflation ruling at 15.57 per cent, anyincrease in diesel prices just now would fuel further hike ingeneral prices.

"Let me make it clear, I am in agreement in theory with(Planning Commission Deputy Chairman) Montek Singh Ahluwaliathat diesel and other fuel prices should be deregulated but Iwill request him to examine (such a move) practically andpolitically," he said ruling out decontrol of prices just now.

Ahluwalia has advocated freeing of diesel prices, on thelines of deregulation of petrol prices, to bring downgovernment subsidies.

Asked if government may consider raising kerosene pricesto check its adulteration in diesel, Reddy replied innegative.

"(It is) politically sensitive to remove subsidies, sonot feasible," he said.

A litre of kerosene costs Rs 12.32 a litre while dieselis priced at Rs 37.75 a litre. The huge difference makes itlucrative for diverting kerosene from Public DistributionSystem (PDS) to mixing in diesel.

"Political feasibility means deeper sense means providingcommodities to the poorer sections of society. We still havethe poorer section of the society depending on kerosene," hesaid.

Reddy, who last week replaced industry-friendly MurliDeora at the Oil Ministry, has ruled out raising fuel pricesas of now.

The government had in June last year decided to makepetrol prices market-determined and had stated that dieselrates will be freed from control in due course.

State-owned oil firms Indian Oil, Hindustan Petroleum andBharat Petroleum are losing about Rs 7 on sales of every litreof diesel and have been pressing for a price hike.

Asked about petrol, whose rates have been raised seventimes since June, 2010, including Rs 2.50-2.54 a litre hikeof this month, Reddy said there will be no rollback in prices,though he did indicate there will be no immediate hike either.

Oil companies are losing about Rs 1.20 a litre on petrolas crude oil prices have topped USD 92 a barrel. In addition,they lose Rs 7 a litre on diesel, Rs 366.28 on LPG and Rs19.60 a litre on kerosene.

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