Industry body Assocham has called for variable pricing of diesel linked to end-consumers and early creation of fuel-pipeline-grid.
Graduated steps should be taken towards market determined prices for diesel rather than de-regulation of the pricing system in one go, Assocham said in a statement.
As for the pricing, the full market price should be charged for diesel used for moving large cars and luxury buses, while the increase should be very moderate for others to begin with, Assocham Secretary General D S Rawat said.
Smaller farmers should be exempt for sometime and in phases should be increased, he added.
"It is inequity when the users of luxury vehicles get diesel fuel at the same subsidised rate as those who drive small and medium sized cars," Assocham said.
Assocham has also suggested that the government should encourage replacing old vehicles, especially trucks, modern trailers with high efficiency engines.
The alternative option of reducing duties on oil products especially on fuel, will be a move from frying pan to the fire, it said.
"If government gives up a major source of revenue like this, it could only do so at the expense of either cutting sharply its development expenditure or raising the level of deficit financing. Either way it would be counter productive for a government committed to raising the growth rate and also making this growth inclusive," the industry body said.
A detailed study by the chamber on diesel use has pointed out that use of high capacity trucks, paving of all major roads with cement and removal of administrative impediments to smooth highway movement of trucks alone could ensure large scale.
It would save the use of diesel in goods transportation and buses which could also mitigate the higher costs transport bodies would have to incur when diesel prices are aligned with the market price, the study said.