It will take at least another 28 months before the under-recoveries on account of sale of diesel can be eliminated.
Addressing the India Energy Congress on Thursday, Planning Commission deputy chairman Montek Singh Ahluwalia said: “Diesel is on a progressive elimination of subsidies and by mid-2015, present under pricing of diesel will be removed.”
Partial decontrol of diesel prices were recently announced by the government. This has allowed the oil marketing companies to increase the prices of diesel by up to 50 paise per litre every month in order to recover the under-recoveries of around Rs 10/litre.
Ahluwalia said the management of energy resources in a world of scarcity is a big challenge. “Rich countries can afford to have energy subsidies because it will not prevent them from becoming richer. But poorer countries, that want to get richer, cannot continue with it,” he said.
Ahluwalia said that from a political point, it was a difficult message to convey (to raise diesel prices). “The (energy) resources are scarce and finite and the capacity for growth and our ambitions are very high,” he said, adding that domestic endowment of energy will not be sustainable without renewable resources of energy.
Emphasising on the need for raising domestic fuel prices, he said diesel, LPG, coal and natural gas are under-priced in India.
“Indian coal is under-priced... If this under-pricing is not altered then...incentives to invest have to be maintained by giving budgetary sops, which is simply not feasible,” Ahluwalia said.