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Rift appears in govt over differential fuel pricing

While Planning Commission deputy chairman Montek Singh Ahluwalia says the country needs to correct the distortion between diesel and petrol prices, heavy industries minister Praful Patel came out strongly in favour of lower diesel prices.

Mail Today Bureau   New Delhi     Last Updated: September 8, 2011  | 08:16 IST

There appear to be sharp differences within the government over the disparity between petrol and diesel prices in the country.

While Planning Commission deputy chairman Montek Singh Ahluwalia on Wednesday said the country needs to correct the distortion between diesel and petrol prices, heavy industries minister Praful Patel came out strongly in favour of lower diesel prices as part of the government's "social obligation".

India needs to adjust its policy to the energy reality as the world is entering an era of high energy costs, Ahluwalia said at the annual convention of the Society of Indian Automobile Manufacturers (SIAM).

The government had freed petrol prices from government control in June last year, but diesel continues to be sold at a subsidised price as it is used in the politicallysensitive farm sector and for running public transport.

Ahluwalia said subsidised fuel is not sustainable in the long-term given the need to ensure energy security. However, reacting to Ahluwalia's remarks, Patel said, "Diesel and petrol price disparity will stay. It will not go away as we have a social obligation."

Patel also extended strong support to diesel-run cars and SUVs. The minister said policy planners and the government need to review their definition of diesel as a dirty fuel.

"There has been question over the environmental sustainability of diesel technology. But if we look in Europe or other developed countries, the technology has developed so much and proved to be even better than the petrol technology," he said.

The minister also said that at the moment there is no move within the government to bring any change in the pricing. The prices of petrol and diesel are more or less the same at the refinery gate, but there is price difference of more than Rs 20 per litre between the two fuels at the retail filling stations.

This is because petrol is seen as a rich man's fuel by the government and carries a tax burden of more than 40 per cent. On the other hand, taxes on diesel are much lower because of political considerations.

As petrol prices were freed from government control in June last year they have risen by 21 per cent to Rs 63.70 per litre from Rs 51.43 a litre. However, this vast difference between the prices of the two fuels is leading to a dieselisation of the economy as consumers are shifting to dieselrun cars.

This has given rise to concerns as the rich are running their cars and SUVs on subsidised diesel meant for the farm and public transport sector.

The issue had been raised in Parliament as well and finance minister Pranab Mukherjee had stated that the government was ready to have a look at the issue. This had caused a lot of uncertainty in the auto sector as car and SUV manufacturers have put in heavy investments to meet the rising demand for diesel vehicles.

Courtesy: Mail Today 

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