Government may end diesel subsidy for cars

The government is likely to end diesel subsidy at least for car owners even as international prices of crude oil remained well above the $100-a-barrel mark.

Replying to questions in the Lok Sabha, finance minister Pranab Mukherjee welcomed opposition suggestion that passenger cars that account for over 15 per cent of the diesel consumed in the country, should be made to pay market rates for the fuel.

According to government estimates, out of the country's total consumption of diesel, 10 per cent is used by industry, 6 per cent by the Railways, 12 per cent by the agriculture sector and 15 per cent by private car owners. Another 8 per cent is used for power generation, while buses and trucks consume 12 per cent and 37 per cent, respectively, the minister said.

"We can accept your suggestion and try to work out what mechanism could be found out so that this section are not subsidised," Mukherjee said.

While trucks account for a major share of diesel consumed within the country, any hike in diesel prices for the goods transporters is bound to push up prices of essential commodities in the country.
 
At present, the government gives a subsidy of Rs6.08 per litre of diesel. On the other hand, petrol prices are market-linked and oil retailers are free to fix prices as and when crude prices rise.

The government had recently announced increases in the prices of diesel, liquefied petroleum gas (LPG) and kerosene supplied through the public distribution system but the hikes have been within limits so that these do not percolate into the market for essential commodities.