For the past few months, the state owned oil companies are down and at present with Rs. 9.28 per litre of diesel that is being sold in India. Therefore, the Government of India has decided to increase the price of diesel by Rs. 1 every month for the next 10 months. So by October 2013, price of diesel will be a little below Rs. 60 per litre.
We can say that the price hike in diesel might chop down the subsidy from government and this might be the same reason to increase the price of diesel. Also, this increase in price of diesel also has chances to drop down the car sales in the Indian auto industry. But it seems, that the trigger has now been pulled and surprisingly, even SIAM (Society for Indian Automobile Manufacturers), too has welcomed the diesel price hike.
According to Prime Minister Manmohan Singh, “We are left with no choices. Energy is underpriced in our country. Immediate adjustment of prices to close the gap is not feasible. I realize this, but some phased price adjustment is necessary.”
According to officials, diesel is sold in India after heavy subsidies, due to which the losses have reached unsustainable levels. Recommendations from the Kelkar panel too were in the favor of hike.
Commenting on the development SIAM says “Though the proposed price hike of diesel is quite steep but SIAM would really support the rationalizing of prize hike and also insists that the rationalizing has to be done in a manner which shouldn’t affect the consumers adversely. It may affect the sales of vehicles for a short term but the elimination of prize distortion will help the industry and economy in the long run”.