Finance Minister Arun Jaitley has announced the deregulation of diesel prices making it cheaper by Rs-3.50 per litre (Delhi). The bold move comes amidst the global drop in crude oil prices to which the fuel will be directly linked to from now on. This might be good news at the moment for diesel vehicle owners but considering the volatile pattern of the crude oil prices seen over time, the reduction can change conversely in no time.
For consumers it’s a welcome respite, given that diesel prices have only gone northwards during the last year or so. Prices of diesel were last slashed way back in January 2009 by Rs-2 per litre, which means that this is the first reduction in almost five years. Diesel and petrol prices were also deregulated in 2002 by the then Atal Bihari Vajpayee led government, only to be controlled again in 2004 by UPA’s Petroleum Minister Mani Shankar Aiyar.
Another important fallout of this move is the easing of the subsidy that the government pays from the budget. The subsidy on diesel is a huge burden for the government with the under-recovery amount coming to Rs-9,037 crore in just the first quarter of this fiscal (April to June 2014). Deregulation will definitely alleviate this concern to a great extent. The Modi led government will also be insulated from accusations of future hike in fuel prices.