Govt's decision to deregulate diesel is 'credit positive', says Moody's

The government's decision to deregulate the price of diesel and to raise natural gas prices signalled fiscal discipline and was a "credit positive" step, although the overall impact could be limited, Moody's Investors Service said on Tuesday.

"The decision to fully deregulate diesel prices signals fiscal discipline on the part of the sovereign, which we view as credit positive," Moody's said in a note.

However, the ratings agency noted the fiscal savings for the government's diesel measures "are likely to be limited" given total subsidies account for less than 1 per cent of the country's gross domestic product (GDP) for the 2013-14 fiscal.

Moody's also noted that any future rise in diesel prices could contribute to food inflation by leading companies to charge more for freight transportation services or for the cost of fuel-intensive machines.

(Reuters)