Diesel prices partially deregulated: Dual pricing mechanism comes into force

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Jan 18, 2013: Government of India which has been under continuous pressure to rein its fiscal deficit and cut down the subsidies has announced the partial deregulation of diesel prices. The diesel prices for individual consumers and bulk consumers will now be different. In dual pricing mechanism, oil marketing companies have announced the hike of diesel prices by 45 paise for a litre of diesel and bulk consumers will have to shell out Rs.10 more than the current price. The bulk consumers like Railways and State Road Transport Corporations nearly consume 17 per cent of the diesel consumed in India.

In a jolt to the people who diesel, government has also decided to increase the price of diesel by 50-60 paise per month till the prices reaches at par with the market price. With this move the government will be able to cut down its subsidy bill and control its fiscal deficit but the other side of it is that it will definitely take away some sheen from people fascinated by diesel cars. This increase in prices of diesel would also mean that bad times for automobile companies especially car manufacturers is set to continue. The car manufacturers are already reeling under increasing cost pressures and currency fluctuation. At a time when car manufacturers are looking to ramp up the production of diesel cars, this would definitely be a jolt to them as well.

The increase in diesel prices will also increase the price of regular commodities as transportation cost will go up. In another move, though the government is trying to rein in on the subsidy bill, they have decided to increase the cap of gas cylinders to house from six to nine.

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