Fuel prices in the country are expected to increase in 2013 as the government wants to curb the growing fiscal deficit and wants to rationalise the energy prices in order to avoid slashing down of expenditure in other core sectors.
"In 2013 fuels will witness an increase in their price since it is too low and is one of the primary contributors to the growing fiscal deficit. The government has also emphasised on the need for elimination of subsidies on fuel that has resulted in huge losses," said an industry expert requesting anonimity.
According to sources in the finance ministry, diesel will see a hike of about Rs 10 in the next 10 months. However, the government will hike the prices by Rs 1 every month in order to evenly pan out the impact on the consumers. Also, the government is mulling to rationalise petrol prices by close to Rs 15 and Rs 20 in the new year.
The Rangrajan Committee report has also suggested that LPG prices should be increased thus indexing it entirely with the international market prices.
The move comes in the wake of the economic situation prevailing in the country. Prime Minister Manmohan Singh said that a hike in energy prices and reduction in subsidies was inevitable and essential for achieving the growth target of 8% in the 12th Five Year Plan.
Singh also noted that if subsidies on energy are not controlled, then the government will have to cut down on other planned expenditures so as to curb the fiscal deficit that the country is facing.
Currently, the state-run oil marketing companies, Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp, are incurring a loss of Rs 9.28 per litre of diesel and Rs 31 per litre of kerosene. The huge losses incurred by these oil marketing companies will result in further hikes in the fuel prices.