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Government Frees Diesel From Price Control

Gas price hiked to $5.61 but no relief to Reliance till it makes up for KG-D6 loss

Published: 19th October 2014 06:04 AM  |   Last Updated: 19th October 2014 08:28 AM   |  A+A-

Diesel_reuters

NEW DELHI: The Union Cabinet on Saturday took two major decisions — deregulating diesel price and approving $5.61 per unit (million British thermal unit) price for domestically produced gas. Diesel will now cost Rs 59.27 per litre in Chennai after a decrease of Rs 3.65 a litre with effect from  midnight. The new gas price, which will come into effect on November 1, will push up fertiliser, power, CNG and PNG rates.

 Addressing the media after the Cabinet meeting that lasted nearly three hours, Finance Minister Arun Jaitley said the Cabinet has decided to deregulate or free diesel prices meaning oil marketing companies can now fix the price according to global crude oil price changes.

“Over the last five years, the (diesel) prices have increased (by) almost 50 paise every month because there was a reduction in international crude prices, while we are linking it to the market price. The price would stand reduced from today,” Jaitley said.

This is the first time since January 2009 that diesel price has come down. It was last raised by 50 paisa on September 1 and has cumulatively risen by Rs 11.81 per litre in 19 installments since January 2013.

Due to the per month hike in price since January 2013, the under-recovery or loss on diesel has been eliminated and oil firms started making profit from the second half of September. The over-recovery or profit has since reached Rs 3.56 per litre.

The government also approved raising natural gas price to $5.61 per mmBtu, though Reliance Industries will get the current rate of $4.2 till it makes up for shortfall in output from the KG-D6 block.

Every dollar increase in gas price will lead to a Rs 1,370 per tonne rise in urea production cost and a 45 paise per unit increase in electricity tariff. Also there would be a minimum Rs 2.81 paise per kg increase in CNG price and a Rs 1.89 per standard cubic metre hike in piped cooking gas.   

Get LPG subsidy Without aadhar

Cooking gas consumers will be able to get subsidy directly in their bank accounts from Nov 15 even if they don’t have Aadhar numbers, as the government will re-launch the DBT Scheme.

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