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Scrapping diesel subsidy: Finance Ministry readies proposal for Narendra Modi govt

Finance ministry officials have readied a proposal for the consideration of the new minister under Narendra Modi dispensation, set to assume office in a few days, for elimination of the subsidy on diesel. As part of its ‘to-do list’, which will be presented to the incoming finance minister, the economic affairs department will also recommend gradual lifting of quantitative and tariff restrictions on import of gold.

Oil marketing companies’ under-recoveries on diesel amounted to INR 62,837 crore in FY14, out of the total under-recovery of INR 1,39,869 crore on petroleum products. Faced with a high fiscal deficit, the Manmohan Singh-led government had decided to cut down on fuel subsidy by increasing diesel prices in small doses of 45-50 paise every month starting January 2013. A direction to this effect was issued to OMCs but there hasn't been a formal decision to eliminate the subsidy. In January 2013, diesel under-recoveries were about Rs 13 per litre. They now stand at INR 4.41/litre.

Source-On Request