Given the prevailing inflationary condition in the country, the Government is not in favour of de-regulating diesel prices.
“I am not of the view that diesel price deregulation is inevitable and that is the position taken by the Petroleum Ministry right now. Given the inflationary situation right now, we don't want to do that,” the Chief Economic Advisor, Dr Kaushik Basu, said at the sidelines of a CII post-Budget conference on Thursday.
However, Dr Basu said that if international crude oil prices continue to remain high, the Government will have to make a tough decision and tackle the question of whether to hike diesel and cooking fuel prices or give out more oil subsidies.
“I can't give you an assurance that it will happen nor can I say it won't happen. It depends on how long the $115-116 a barrel cost situation lasts. There can come a point where we are forced to confront the question – do we take it on the fiscal or do we pass it on consumers,” Dr Basu said.
The Finance Ministry estimates the oil subsidy for the year 2011-12 lower than the last year. For 2011-12 the oil subsidy projection stands at Rs 23,640 crore while for the current fiscal it was Rs 38,386 crore.
International crude oil prices have breached the $100 a barrel mark and have reached their highest levels since 2008.
In June 2010, the Government had decided to free petrol pricing and a decision on diesel was expected to come eventually.