Govt explores ways to beat diesel crunch

The government has called the chiefs of state-run oil companies to discuss the problem of diesel shortage in the country.

“There have been reports of diesel shortages in Pune and other parts of Maharashtra, among other places. I have called a meeting of oil PSU chiefs on August 19 to seek an explanation,” petroleum minister Murli Deora said.

The demand for diesel has risen nearly 25 per cent in recent times as it is increasingly being used in power generation instead of fuel oil and naphtha that are costlier.

“The demand-supply gap seems to have widened because of this,” Deora said.

Indian Oil Corporation chairman Sarthak Behuria has said the company would not be importing diesel and sell it at low prices to meet the rising demand.

Diesel is heavily subsidised because it is used in the public transport system and by the farm sector and truckers.

Oil marketers say the fuel is now being used by commercial and industrial users, which is pushing up the demand. There is also a heavy demand for the fuel in shopping malls and housing projects as they use diesel generators for back-up.

The high-powered committee on the financial health of oil companies, headed by B.K. Chaturvedi, which has been pushing for a price hike in petrol and diesel, has suggested different pricing norms for industrial and commercial users.

The committee felt industrial units, which account for about 10 per cent of the total consumption of diesel, should not be eligible for subsidy. The sale of the fuel to industrial and commercial users should be done at market prices.

It has also proposed an increase of 75 paise per litre in the price of diesel every month till 2010. In addition, it has suggested a “metro extra” tax of Rs 2 a litre.

Oil companies are losing Rs 23 a litre from selling diesel at subsidised prices, even after a price hike of Rs 3 per litre in June.

The annual consumption of diesel is around 48 million tonnes (mt).

The government continues to subsidise the fuel heavily as it is fighting a 16-year high inflation of 12.44 per cent. Diesel is the favoured fuel of truckers and any increase in its price has a cascading effect on inflation.