The cabinet meeting on Thursday is set to consider the petroleum ministry’s proposals to increase diesel, cooking gas and kerosene prices, a move the government aims to partly offset by raising the ceiling on the number of subsidized LPG cylinders.

If approved, the new prices will take effect from midnight Thursday. “The agenda on petroleum product price rise and the cap on LPG cylinders will be handed out to ministers at tomorrow’s cabinet meeting,” sources said.

Two major players announce price rise in the range of 10-34% across segments

Gujarat government-owned gas distribution player, GSPC Gas Company and the Adani Group's gas distribution arm, Adani Gas have announced sharp increase in gas prices for the domestic, industrial and CNG consumers. The price hike was attributed to the costly imported LNG and non-supply of cheaper domestic gas to Gujarat by Centre.

In a bid to neutralise political opposition to planned fuel price hikes, the government is considering a two-step process: First, allow up to 12 subsidised domestic gas cylinders per year from the currently proposed nine and later, raise prices of LPG and diesel in a phased manner.

Sources told FE that a compromise is being worked out after some Cabinet ministers termed the six-cylinder cap and the proposed fuel price hike as “politically suicidal”. A section of the ruling coalition too feels these steps could cost the UPA at the hustings.

Delhi set to become first kerosene-free state

With the distribution of filled liquefied petroleum gas (LPG) cylinders in the Rajinder Nagar assembly constituency, the government has begun the process of making Delhi a kerosene-free state. The constituency is represented by the Transport Minister, Ramakant Goswami. A few years ago, the government had announced that it would distribute gas cylinders and stoves free of charge to the BPL cardholders to make the Capital kerosene-free.

New Delhi:The oil ministry’s proposal for a dual pricing regime for diesel — having a market price for bulk consumers and subsidized rate at pumps — would work to the disadvantage of state-run fuel retailers and spark diversion.

The option is one of the suggestions made in the ministry’s response to recommendations for reducing deficit made by a finance ministry panel under former bureaucrat Vijay Kelkar.

Ahmedabad: The Gujarat high court on Thursday directed the Centre to file an affidavit in a week’s time explaining why the court should not take punitive action against responsible persons for noncompliance of its order to supply CNG to Ahmedabad at a rate supplied to Mumbai and Delhi.

On July 25 last year, the bench headed by Chief Justice Bhaskar Bhattacharya ordered for conversion of all public vehicles to CNG and asked the Centre to provide gas to the city at the price at which it was supplied to metro cities.

Pressing ahead with the Kelkar Committee recommendations and grappling with massive under-recoveries, the Petroleum and Natural Gas Ministry has initiated a Cabinet note to raise the cap on subsidised LPG supply from six to nine cylinders a household a year, and increase diesel, LPG and kerosene prices in phases.

As the Finance Ministry refused to share the subsidy burden of the oil marketing companies, the Petroleum Ministry is pressing for a phased price increase to cut the subsidy down to the bare minimum during the next two-four years.

The oil ministry has proposed a hike of R3-4.50 per litre in diesel price and R100 per cylinder in LPG rates, along with raising the number of subsidised cooking gas cylinders for households to nine a year from the current cap of six.

The ministry has moved a note for consideration of the Cabinet, proposing options for meeting a record R160,000-crore deficit arising from selling auto and cooking fuels below their cost.

Faced with a hefty bill of close to R1 lakh crore this fiscal towards compensating oil marketing companies on selling diesel below cost and naysaying by the finance ministry, the petroleum ministry is set to ask the bulk consumers of the fuel to buy it at market rates.

Currently, bulk consumers — power plants based on diesel, companies with captive power units, the railways and road transport corporations — buy the fuel at subsidised rates but at slightly lower rates than the retail consumer, thanks to a waiver of dealers’ commission and discounts offered by the oil companies which compete to get the tenders.

Analysts say any increase in diesel and kerosene prices will be positive for market sentiment.