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Decontrol petrol, diesel prices: Survey

NEW DELHI: Criticising the government for “imperfect handling” of the fuel price hike, the Economic Survey has called for de-regulation of petrol prices, putting a higher limit for decontrol of diesel and limiting LPG cylinder subsidy to a maximum of 6-8 cylinders a year per household.

It is time petrol and diesel prices are decontrolled, the Economic Survey states. “This is the right time to undertake this step as the global crude prices are stable and inflation is low. The entire raw material price rise in crude oil prices should be passed on to the consumers.”

The survey says that as long as the domestic prices remain below the cost of import, demand will continue to grow, accentuating the negative impact. “At times higher inflation and on other occasions political imperatives have prevented a better alignment of fuel and fertilizer and food prices with the border/market prices.” In practice, the issues of prices were addressed somewhat imperfectly through a sharing formula that represented a mix of government subsidy, taxation of rents and some pass through, the Survey said.

The survey is of the view that State oil retailers should be given the freedom to fix diesel prices till such time as crude oil price is below $80 a barrel. When prices cross this mark, a measured policy response system and financial buffer should set in to insulate the farmers and truckers from abnormally high rates, it said. For petrol, it set no such ceiling.

The survey recommended phasing out of kerosene supply subsidy by ensuring that every rural household without electricity and LPG connection has a solar cooker and solar lantern.

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