The Cabinet Committee on Political Affairs on Thursday approved a hike in diesel price by Rs. 5 per litre at a meeting at the Prime Minister’s residence in New Delhi.
The price of PDS kerosene was left unchanged.The Finance Ministry had earlier in the day proposed a hike of at least Rs. 100 per cylinder of LPG and Rs. 4 per litre of diesel.
The government subsidises the prices of diesel, cooking gas and kerosene to dampen inflation and protect the poor, a popular policy that has put a severe strain on public finances.The government has acknowledged earlier that a price hike is essential for curbing the fiscal deficit, a pre-condition for reviving growth in Asia's third largest economy.
A price increase will also aggravate inflation, as costs, such as road freight rates, will rise.State-run oil marketing companies are losing Rs. 550 crore everyday on under-recoveries as a result of higher crude prices in the global markets. They make a loss of Rs. 19/litre on diesel sales, Rs. 32.7/litre on kerosene sales, and Rs. 347/cylinder on cooking gas sales every day.
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