Sep 14, 2012, 10.46 AM IST

Diesel price-hike inevitable; start of subsidy-cut: Experts

Former oil-sector bureaucrats, RS Sharma, ex- CMD, ONGC and RS Pandey ex-secretary, oil ministry explain to CNBC-TV18 that the much-delayed hike in diesel was inevitable and desperately needed. Both concurred that though the move would make the consumer's life harsh, in the long run it would reduce the government’s burden and boost the economy.

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But consumers have to understand the reality that this is only the beginning.

RS Sharma

Former Chairman, ONGC

Former oil-sector bureaucrats, RS Sharma, ex-CMD, ONGC and RS Pandey, ex-secretary, oil ministry explain to CNBC-TV18 that the much-delayed hike in diesel was inevitable and desperately needed. Both concurred that though the move would make the consumer's life harsh, in the long run it would reduce the government's burden and boost the economy.

Below is an edited transcript of the analyses on CNBC-TV18.

Q: What is your reaction on the government's decision to hike diesel prices and leaving petrol prices untouched?

Sharma: I would say something is better than nothing. The manner in which the government has been dragging its feet on this issue caused lot of worry to the oil marketing companies. I think the OMCs will receive a relief of around Rs 16,000 crore relief out of the total under recoveries to Rs 40,000 crore.

Q: Though the government has capped the number of LPG cylinders, it hasn’t hiked the price of LPG cylinders, but LPG cylinders will now be available at market rates which haven’t been notified yet. How significant is this move?

Sharma: The move is very rational and I don’t think any fault can be found. It’s a welcome step.

Q: The government has left kerosene untouched. Was it the fear of a political backlash that the price of kerosene was not increased?

Sharma: I think that the government decided to bite only half the bullet. There should have been some correction in the price of kerosene and LPG which carries an irrational subsidy of over 40%.

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