Government of India raises diesel price by Rs.5: Will help reduce distortion in petrol and diesel fuel price

Fuel price hikes are back once again to haunt us, only this time round owners of petrol vehicles have heaved a sigh of relief. In fact, the Society of Indian Automobile Manufacturers (SIAM) is in agreement with th egovernment’s decision which will be a step towards reduction of differential between petrol and diesel prices In India. The Government of India (GOI) has increased prices of diesel by Rs.5 which came into effect late last night. While the GOI has received accolades from the Auto industry and Markets, customers of diesel engined vehicles and hapless farmers are bound to suffer a great deal.

The decision on increasing prices of this fuel has been pending for some time now. Prices of diesel were increased to rein in its fiscal deficit. The subsidy on diesel was one of the major drains on the government exchequer and hence this timely decision which will go a long way in reviving a sluggish economy.

Obviously, this decision has not gone down well with the opposition. The Trinamool Congress has organized a protest march this weekend while the BJP has called the move a financial terror demanding an immediate roll back. This price rise will have a cascading effect on the entire economy. Prices of goods and vegetables will obviously be raised which will cause an overall inflationary situation in the country and confusion in the economy.

Speaking on the development, Mr. S. Sandilya, President said, “We welcome the increase in diesel prices as this step bythe government will help reduce distortion in fuel price up-to some extent.”

“Diesels prices had been kept stagnant by the government since June 2011 despite increases in the overall crude prices in the International markets. This price correction will certainly help the government to recover some part of subsidy going to the fuel account. It is also important to note that the petrol prices have not been increased simultaneously, while excise duty has been brought down giving relief the Oil Industry. It is difficult to predict the impact on the demand for vehicles at this stage.” He added.