With diesel price deregulation likely at some point this fiscal, high subsidies on LPG and kerosene will continue to be a major challenge, Icra Research said on Monday.
With the BJP-led government continuing with the previous government’s decision of raising diesel prices by up to 50 paisa per month, “the retail price of diesel could get aligned with the market determined prices within FY’15 barring a spike in crude oil prices or depreciation of the rupee versus the US dollar,” it said in a statement here.
Despite reduction of subsidy on diesel, the gross under recoveries in 2014-15 are expected to remain high because of domestic cooking gas (LPG) and PDS kerosene.
“Gross under recoveries in FY’15 are expected to remain high owing to the large under recoveries on the sales of LPG (domestic) and PDS Kerosene with the under recoveries of the former forming the major chunk of the gross under recoveries,” it said.
The decision to raise cap on supply of subsidised LPG cylinders to 12 per annum from 9 and keeping DBT scheme on hold have also led to the high subsidy burden of domestic LPG. “The LPG demand is expected to remain high due to increased cap of subsidised cylinders, which tend to encourage the diversion of domestic LPG to commercial purposes,” Icra said.PTI