Government of India deregulates diesel prices

The Government of India has deregulated the price of diesel. This will mean that the price will be linked directly to global crude oil prices.

Till now diesel was sold at a rate fixed by the Government. These rates are much lower than the cost of production. This was resulting in a loss to oil companies. In order to gradually wipe out these loses, the government had permitted retailers to raise the price of diesel by up to 50 paise per month in January 2013. Since then, the price of a litre of diesel has risen by Rs. 11.81.

Now, with a reduction in the international prices of diesel, oil companies have started making a profit and the government's move has resulted in a drop in the price by Rs. 3.37 in New Delhi.

The Governor of the Reserve Bank of India had recently advised the Government of India to deregulate diesel prices. However, the deregulation is not without its risks. Any rise in the global prices of crude oil will impact the prices in India directly and that could send prices of goods shooting up, since most of the goods transport is dependent on diesel-powered vehicles.

Deregulation will encourage private operators to enter retail sales as well. Companies such as Reliance and Essar do not receive government support for selling diesel at discounted rates. They currently sell fuel through state refiners despite having their own sales infrastructure.

Source: NDTV

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