Pranab ‘keen’ to free diesel, LPG prices; kerosene subsidy to stay

Under pressure to cut subsidies on petroleum products, which is skewing the government's fiscal outlook, finance minister Pranab Mukherjee said on Sunday the government is keen to free prices of diesel and liquefied petroleum gas (cooking gas), but will continue to subsidise kerosene.

"Petrol we have done (decontrolled). Diesel, kerosene and LPG we want to do it. Kerosene we may have to provide some subsidy because people who have no access to electricity use kerosene for lighting," Mukherjee said in an interview with PTI.

He said the government wants to link the prices of domestic oil products with those prevailing in the international market, as has been done with petrol last year.

Though petrol prices are linked to market rates (though still largely dictated by the government), the state compensates the oil marketing companies for losses on account of heavily subsidised sale of diesel, kerosene and LPG through direct payments and oil bonds.

Referring to the recommendations of a task force headed by former Infosys chief Nandan Nilekani (who heads the Unique Identification Authority of India) on direct transfer of subsidy, Mukherjee said, "The task force is looking into it. After the pilot projects being launched, they will come out with recommendations reviewing the pilot project outcomes."

The task force has urged the government to launch pilot projects to switch to direct transfer of subsidy in case of kerosene, cooking gas and fertiliser in order to curb pilferage.

While increasing prices of kerosene, diesel and LPG in June, the government had slashed customs and excise duties on petroleum products to cushion the hike in rates, sacrificing an annual Rs49,000 crore in revenue.