No diesel decontrol now: Kaushik Basu

The Government is not contemplating deregulation of diesel prices as of now as inflation remains elevated, but it may have to consider the move if crude oil continues to rise, chief economic adviser to the Union Finance Ministry, Kaushik Basu said. "Diesel price deregulation is not inevitable...given the inflationary situation right now, we don’t want to do that," Basu told reporters at an industry summit organised by the Confederation of Indian Industry (CII).



According to Basu, the diesel pricing issue essentially depends on crude oil prices, which are on the upward swing due to geopolitical crises in the Middle East and North African region. The Petroleum Ministry and other government agencies were of the similar view that diesel prices would have to be deregulated if crude hits US$150 per barrel from the current level of US$115 a barrel.

The Government will have to make a tough choice between hiking diesel and cooking fuel prices and shelling out more on oil subsidies to companies.

"I can’t give you an assurance that it will happen nor can I say it won’t happen....It depends on how long the US$115-116 a barrel lasts. There can come a point where we are forced to confront the question - Do we take it on fiscal or do we pass it on consumers," Basu said.

For FY12, the Finance Ministry has estimated Rs 23,640 crore in oil subsidy, lower than Rs 38,386 crore of the current fiscal year. Global crude oil prices are at the highest level since 2008, hovering around US$116 per barrel. Basu has repeatedly favoured a hike in diesel prices but the Government has kept deregulation on hold due to its impact on inflation and anger of the voters.