The government has bit the bullet. On Thursday evening, the Centre announced an unprecedented 12% increase in diesel prices of Rs.5 and cut cooking gas subsidy, reports said.
As expected, the Opposition and couple of allies are up in arms against the fuel price revisions.
Trinamool Congress’ Mamata Banerjee, who despite being an ally of the government has opposed most of its policy proposals and decision, has said, “The matter is very serious and sensitive. We will discuss in our party meeting and our plan of action.” Banerjee has sought a roll back on the hike.
Other parties such as the BJP, Samajwadi Party and the Left parties have also given a thumbs down to the move.
Meanwhile, industry bodies such as Confederation of Indian Industry (CII) have welcomed the move. CII Director-General Chandrajit Banerjee said, “The decision of the government to hike diesel prices and LPG are borne out of necessity. CII fully understands the economic compulsions for such a decision. Rationalisation of fuel subsidies is a necessity from the point of fiscal consolidation and therefore, CII congratulates the Government on this bold decision.”
However, others, though not opposed to the move, said the increase should have been at lower levels at intervals. Sugato Sen, Senior Director at the Society of Indian Automobile Manufacturers said that the increase should have been in shorter spells of Rs.1 to 2 so that customers could have absorbed it better.
The government also decided to limit the number of subsidised cooking gas cylinders per household to six per year. Any LPG cylinders bought over this ceiling will be at market rates, which could almost double the price.
The move was necessary as the government has been under pressure lately due to its escalating fuel import bills and rising twin deficits as a result of its fuel subsidies.
However, it remains to be seen if the government again gives in to pressure from the Opposition and allies and rolls back the reform.