India mulls dual pricing for diesel fuel

India’s Petroleum Ministry is looking into a dual pricing policy for diesel fuel that would entail charging bulk users a higher price for the subsidized fuel, a senior official said. Oil public sector undertakings (PSUs) had proposed to the Petroleum Ministry that diesel fuel for industries and big cars be sold at Rs57 (US$1.23) per liter, instead of the current price of Rs34.80 (US$0.75) a liter. If the policy is implemented, bulk and industrial users would be charged Rs22.20 (US$0.48) more. Diesel demand in April-July had gone up by 18%, with bulk of the growth coming from industrial users like power plants. The unprecedented growth in demand has seen domestic output fall short of the requirement and a total of 4.14 million tons of diesel fuel may have to be imported in 2008 to 2009. Oil companies are projected to lose about Rs100,000 crore (US$21.5 billion) on diesel sales this year, as the subsidized fuel is increasingly being used in industries for power generation. The power sector had seen a whopping 152% rise in demand in the first quarter to 53,000 tons, while the fisheries and the marine sector had seen a near-40% growth. Differential pricing of diesel fuel would reduce the revenue loss by Rs27,202 crore (US$5.8 billion) in 2008 to 2009. “We are considering dual pricing but it is very difficult to implement,” Deora said. Half of the projected Rs184,801 crore (US$39.7 billion) revenue loss on the sale of petrol, diesel fuel, LPG and kerosene in fiscal 2009 is from diesel fuel sales. (September 2/12/15, 2008)