Hike diesel price by Rs 5/litre, LPG by Rs 250/cylinder: Panel

Prices of diesel and LPG cylinders would go up sharply if the government accepts the recommendations of the Kirit Parikh panel.

The government had constituted a committed under former Planning Commission member Kirit Parikh to suggest a suitable pricing mechanism for petro products.

The Kirit S Parikh panel in its report has recommended an immediate Rs 5/litre hike in diesel price. The Rs 5 rupee diesel price hike could cut the annual subsidy bill by Rs 40,000 crore, said Kirit Parikh, the head of the government panel that submitted the report.

The panel also proposed a Rs 4/litre increase in kerosene price and Rs 250 hike in subsidised LPG cylinder. The panel also recommended the quota of subsidised LPG cylinders be reduced to 6 per household in a year from 9 at present, besides capping the subsidy on diesel sales at Rs 6 a litre.

The recommendations of the committee are not binding and need Cabinet approval to be implemented.

The panel's recommendations have come at a time when the government is under attack for failing to control inflation driven by high food and fuel prices. Any big hike in diesel prices would increase prices further.

With state elections looming from November and a general election due by May 2014, the government may find it difficult to raise domestic fuel prices sharply.

For the current fiscal, the total subsidy for selling diesel, kerosene and LPG at rates below cost was initially estimated at Rs 80,000 crore but it has now climbed to around Rs 130,000 crore due to the rupee volatility against the dollar.

India, the world's fourth-largest oil importer, needs to rein in spending to help stabilise its finances and support the rupee, which hit a record low earlier this year. (With Agency Inputs)