Oil ministry used EC to avoid monthly diesel price hike

NEW DELHI: The oil ministry may have used the Election Commission last month to avoid raising diesel price for fear of stoking ire of voters in the ongoing polls. But its bluff is going to be called this month-end since the under-recovery on the country's largest selling fuel has exceeded the subsidy level of Rs 6 per litre that the ministry made the EC to believe was fixed as per an expert panel's suggestion.

The ministry last month referred the issue of monthly diesel price increase to the EC, even though it was a policy decision that has been in practice for over a year. The ministry impressed upon the EC that the panel on fuel pricing reforms under Kirit Parikh had recommended freezing subsidy at Rs 6 a litre.

What was left unsaid was that the Parikh panel's figure was a suggestion and was to be implemented along with a one-time hike of Rs 5 per litre to wipe out the under-recovery level of Rs 10-11 per litre prevailing when the report was being drawn up.

The fact is the government never accepted the recommendations in toto. In January 2013, when under-recovery stood at Rs 9.25 per litre, the Cabinet took up the Parikh report and decided to raise diesel price every month in "small doses" — later decided at 45-50 paise per litre excluding VAT by the All India Congress Committee — till subsidy was wiped out. At the same time, petrol price was freed from government control.

Since then, diesel price has cumulatively risen by over Rs 8 per litre. The price has been revised every month, except for two months in the run-up to last year's Karnataka assembly election. But the government asked the state fuel retailers to make up for the hiatus with a 90-paise hike on May 1, 2013 once the state polls were over. What nails the ministry's lie to the EC is that under-recovery at that time stood at Rs 3.80 and continued to slide further till June but the monthly hikes continued.

Another round of monthly hike is a week away but voting would continue till May 12. It remains to be seen whether the government once again plays politics or go by norms.