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Govt may announce dual pricing policy for diesel

Bulk users and industries may no longer be able to use subsidised diesel as the government may announce a dual pricing policy for the fuel.

, ET Bureau|
Oct 03, 2008, 01.53 AM IST
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NEW DELHI: Bulk users and industries may no longer be able to use subsidised diesel as the government may announce a dual pricing policy for the fuel.

The proposed policy would restrict supply of subsidised diesel to public transport, railways and the agricultural sector.

Other bulk users such as power producers, marine sector, special economic zones (SEZ), export-oriented units (EoU) and defence establishments may have to pay market rates. A section of policy makers is even in favour of charging the fuel���s market price from the diesel-run luxury cars.

It is learnt from official sources that petroleum minister Murli Deora, who was earlier apprehensive of having a dual pricing policy ��� due to implementation problems ��� has now agreed to take necessary steps to curb diversion of the highly-subsidised diesel.

The government has swung into action after diesel demand soared 17-20%, leading to an under-recovery of estimated Rs 1,30,976 crore in the fiscal year. It is found that subsidised diesel, being cheaper than other industrial fuels such as naphtha and furnace oil (FO), is largely used for power generation.

While diesel is selling at Rs 42,000 per tonne, naphtha is selling at Rs 55,000 per tonne. Naphtha, thus, proves to be a more expensive fuel when compared to diesel. Industry analysts say the subsidies being provided by the government ��� currently at Rs 13 per litre ��� is being diverted to customers who can afford to pay market prices.

The proposed move is expected to charge a market price for 13% diesel consumed in the country. This would save Rs 10,000 crore in a year, sources said. Diesel is sold in Delhi at Rs 34.86 per litre.

The oil ministry is also in favour of charging market rates for fuel supplied to diesel-run private vehicles and swanky sports utility vehicles.

As its implementation is considered impractical, alternatively, officials have suggested imposing substantially-high import duty and excise duty on such vehicles to dissuade people from buying diesel-run fuel-guzzling cars. ���The objective of the tax should not be revenue generation, but the tax would dissuade use of diesel cars,��� an official said.
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