<div>The increase has been steady, but it did not hit people immediately. It was one of the smartest moves by the UPA-II ministry — to hike high speed diesel (HSD) prices by 50 paise every month. And it has yielded results, without too much of a bickering, except when it was first announced in January 2013. With the Narendra Modi government continuing with the policy of the UPA-II government, diesel prices in Delhi have risen to Rs 57.28 per litre in June from Rs 47.65 per litre in January 2013.</div><div> </div><div>That has resulted in reducing the under-recovery on diesel to an all-time of Rs 2.80 per litre from Rs 4.41 per litre before the hike. It had stood at Rs 8.37 a litre in March. While the gradual hike in prices is important, what has also aided the fall in under-recovery this time round is the strengthening of the rupee vis-à-vis the US dollar. Currently the rupee is trading at Rs 59.03 to the dollar. It is believed that if the rupee rises to Rs 56 per dollar, the under-recovery will be wiped out.</div><div> </div><div><img width="200" vspace="3" hspace="3" height="200" align="right" alt="" src="/image/image_gallery?uuid=dd06ba3b-d6ff-40f3-b792-46fff9a046d9&groupId=36166&t=1401713270334" />With the rupee strengthening against the dollar, the government is in a position to finally decontrol diesel prices. That’s important since diesel accounts for 44 per cent of India’s fuel consumption while petrol accounts for 10 per cent. With petrol already decontrolled, it means that more than half of India’s fuel consumption will be at market prices.</div><div> </div><div>While that is good, the impact on state-owned oil marketing companies (OMC) continues. As of June 2, OMCs are incurring a combined daily under-recovery of about Rs 262 crore on the sale of diesel, kerosene and domestic LPG. This is, however, less than the Rs 318 crore daily under-recoveries during the previous fortnight. While the under-recovery in diesel has come down, it is still Rs 32.87 per litre of kerosene. In the case of domestic liquefied petroleum gas (LPG), the under-recovery is to the tune of Rs 432.71 per cylinder.</div><div> </div><div>The government will now have to look closely at hiking the prices of LPG and kerosene which are generally perceived to be the common man’s fuel. With the rupee strengthening against the dollar, the price of the Indian basket of crude oil was $ 107.14 (Rs 6324.47) per barrel (bbl) on 30 May as against US$ 107.59 (Rs 6330.60) per bbl on 29 May.</div><div> </div><div> </div><div>Anupjayaram@gmail.com</div><div>anup@gmail.com</div>
