Oil firms hiked the price of diesel on the same day the government allowed them to set its price. Indian Oil Corporation increased the price of diesel by Rs 45 paisa a litre while cut petrol price cut by 25 paisa per litre. The price revision would be effective from Thursday-Friday midnight.
In a bold reforms decision, the government on Thursday partially deregulated diesel price, allowing a hike of 40-50 paise a litre per month for retail customers and nearly Rs 11 for bulk consumers, a step that is feared will have a cascading effect on inflation.
In a bid to sweeten the bitter pill, the Cabinet Committee on Political Affairs chaired by Prime Minister Manmohan Singh on Thursday raised the cap on subsidised LPG to nine cylinders per household from six, bowing to public pressure.
The decision on diesel is expected to cut the subsidy bill by Rs 12,900 crore on account of hike in price of fuel sold to bulk consumers like Railways and state transport undertakings. Diesel accounts for 59 per cent of the estimated Rs 160,000 crore fuel subsidy bill in 2012-13.