New Delhi: The Central Government is under pressure to decontrol diesel prices. Economic Advisory Council to the Prime Minister (PMEAC) has requested the government to discontinue its role in fixing price of diesel in order to check subsidy load. PMEAC has also suggested a big cut on current subsidy portion on cooking gas.

A Few days earlier, RBI had also advised the government to let the oil companies decide on diesel prices.

However, the Council Chairman Dr C Rangarajan does not believe that decontrolling diesel prices will have big impact on inflation.

Any step towards it should come in next FY and in gradual steps pricing decision on diesel should be transferred to oil companies. According to Rangarajan, rising diesel prices will increase inflation for a shorter period of time. After a while it will enter economic cycle. Any decrease in subsidy load will significantly impact economic growth.  

The government is not passing rising crude oil prices on the domestic customers because of an increasing diesel subsidy load.

Oil companies are accounting a loss of Rs 13 per litre on diesel. On diesel alone, oil companies are facing a loss of 70,000 crore per year. Central government may need to pay Rs 70,000 petro subsidy in FY 2011-12.