Govt may sell subsidised diesel to state transport companies

Sep 28 2013, 10:07 IST
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SummarySC had endorsed govt order making it mandatory for state public transport utilities to buy diesel at market price.

A little more than a week after the Supreme Court endorsed its order making it mandatory for state public transport utilities to buy diesel at market price, a politically sensitive government is now considering a withdrawal of the relevant order.

"The oil ministry is mulling the withdrawal of the order that made it mandatory for STUs to buy diesel at market price. We have received representation from various states on the issue," said oil minister Veerappa Moily on Tuesday.

While allowing the OMCs to reduce their under-recoveries (it is another matter the high crude oil price and weak rupee have negated most of this), the decision has impacted the financials of the loss-making public transport utilities, for whom increasing passenger fare was the only option left to survive.

STUs protested the January move of the government to ask bulk users like themselves as also the railways and defence to buy diesel at market price which currently is Rs 14.50 per litre more than the petrol pump price.

Bulk diesel sales accounted for roughly a fifth of the consumption of this fuel before the order and since the removal of the subsidy for bulk consumers, there has been a shift away from bulk sales.

Moily said that the oil marketing companies have also reported problems owing to the move to offer STUs diesel at market prices. "Oil marketing companies have reported that the dual pricing mechanism is not working since STU bus fleets are taking fuel from petrol pumps causing hindrance in the smooth functioning of retail outlets and in the process wasting fuel," the minister added.

Ministry officials, however, said that the matter will have to be taken to the Cabinet to make a final decision. "We will consider allowing STUs to purchase diesel at the subsidised price in view of the need to encourage public transport but this would be subject to their active cooperation in our conservation campaign," Moily said.

The Supreme Court had earlier this month endorsed the government's decision to charge market prices for diesel sold to bulk buyers such as defence, railways and transport corporations. The apex court had said that subsidises cannot continue forever and ultimately the economy has to survive.

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