09 points to know about deregulation of diesel
TRANSCRIPT
Points To Know About
Deregulation of Diesel 09
Deregulation means the prices of diesel will move as per
market flow (market-linked) - just like petrol.
The government will no longer decide the selling price of
diesel in the country. The decision will now be taken by the
Oil Marketing Companies (OMCs) like BPCL, HPCL and
so on.
What is Deregulation of Diesel?
Know the impact of
Deregulation of Diesel:
#1 Price Decision
As of now the price decision would be market-linked, it
would depend on global crude oil prices. If they move on
the higher side one would be paying more and goes down
one will be paying less.
#2 Subsidy Bill
The government's subsidy bill will come down as it will no
longer have to reimburse oil companies for selling diesel at
below-market price. In 2013-14, the government had to
pay Rs. 85,000 crore for selling diesel, LPG and kerosene
at below-market prices. This year the subsidy burden was
estimated much lower at around Rs. 63,000 crore.
#3 Diesel Prices
The cut in diesel prices will lead to further cooling off of
inflation because diesel is the most used fuel product in the
agriculture sector and the transportation industry, both of
which can have a direct bearing on food prices.
#4 Future Investments
It will help the ‘Automobile manufacturers’ to plan for future
products and investments in a better way.
#5 Diesel Sales
Diesel sales account for about 55 per cent of overall sales
of oil marketing companies. Till now, these companies had
to pay part of the subsidy (partially regulated) on selling
diesel at below-market price to the government.
Deregulation of diesel will ensure that these companies will
not have to shell out money for diesel subsidy which in turn
will lead to higher profitability for them.
#6 Subsidy
The freeing up of diesel prices and the sharp fall in global
crude prices is expected to further save the government
over Rs. 10,000 crore in subsidy payment this year. Lower
subsidy means the government may be able to meet its
fiscal deficit target of 4.1 per cent of GDP. This will be a big
positive for the Indian economy.
#7 Fiscal Deficit
Lower fiscal deficit will lead to reduction in government
borrowing and increase spending on asset creation which
in turn will add to economic productivity.
#8 Competition
It could also mean increased competition in the fuel
retailing segment. This could eat into the margins and
market share of the public sector oil marketing companies
(OMCs).
#9 Fuel Retail Market
Market-determined pricing for diesel is vital for the viability
of the retail business as the fuel accounts for 44% of the
total consumption of petroleum products in the country.
(from 36.64 million tons in 2002-03, diesel sales have risen
to 69.16 mt in 2012-13.) While diesel contributes nearly half
to sales at fuel stations in the country, along highways, its
share is as high as 80-90%.
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