New Delhi : Government has allowed state-owned oil companies to raise the price of kerosene by 25 paise a litre each month for 10 months to cut the subsidy burden.
On July 1, kerosene price was hiked by 25 paise a litre, the first increase in rate of the highly subsidised cooking and lighting fuel in five years. “Petroleum Ministry has conveyed to oil marketing companies to raise kerosene price by 25 paise every month till April 2017,” a senior official said. The first increase has been notified by the oil companies but the rates have so far no reflected in the price of kerosene sold through public distribution system (PDS). It will happen after state governments concur.
Before the price hike, kerosene cost Rs 14.96 a litre in Delhi. Its price was last raised by Rs 2.64 a litre in June 2011.
The previous increase happened in June 2010, when prices went up by Rs 3.23 a litre. Officials said PDS kerosene price of Rs 14.96 a litre was at Rs 13.12 discount to the fuel’s actual cost of production. Of the discount, the government bears Rs 12 a litre and the rest of the bill is footed by upstream oil producers like ONGC.
Kerosene accounted for 41.7 per cent of the total petroleum subsidy of Rs 27,571 crore in 2015-16. The previous UPA government had taken a similar approach of raising rates in small dosage of 50 paise a litre per month to completely eliminate subsidy on diesel. This approached helped the present BJP-led government to deregulate diesel price in October 2014. Petrol price was deregulated in June 2010.
As per Icra estimates, the move to increase retail prices of subsidised kerosene by Rs 0.25 a litre per month for 10 months (from July 2016 to April 2017) would lead to overall reduction in gross under-recovery or subsidy by Rs 760 crore in current fiscal and Rs 2,040 crore in FY18.
