Government may raise Diesel prices for Industry

This seems to be a good idea by which the Government will be able to stop subsidising industry and at the same time would not directly affect the common man.
India may charge higher diesel prices for industrial users and allow Reliance Industries to sell gas oil from its export-focused refinery to local retailers struggling to meet soaring demand, senior officials said.Diesel sales have risen sharply despite the government's move to raise fuel prices by about 10% in early June. Use of diesel by industrial units, which find the subsidised fuel cheaper than freely priced fuel oil, and for emergency power supply in homes, malls and offices, has raised demand and forced refiners to increase imports. Diesel sales rose 18% during April-July compared to a year ago, the chairman of India's biggest oil refiner and retailer, Indian Oil Corp, Sarthak Behuria said. Sales to agriculture and transport sectors rose 10-12% while that to power and other sectors rose 30%, he said. "We are exploring the possibilities of differential pricing for commercial consumers. A note has been put up with the ministry," Behuria said. Hindustan Petroleum Corp chairman Arun Balakrishnan said state refiners wanted to sell diesel at market prices to industrial clients. "Currently we are losing Rs 15-16 a litre on diesel, at least we will recover that." Oil secretary R S Pandey said: "Market price that's what they have demanded so we have to look at it." Indian state-refiners aim to import up to 3.5 million tonnes of diesel in the current financial year ending March 2009 and are seeking changes in tax rules to help them buy diesel from Reliance as this would save them freight cost.Export-oriented projects like Reliance's refineries get tax concessions but if the plant sells its output in the domestic market, it is heavily taxed. "If India changes the tax rules, this will not only cut its dependence on imported diesel, state-refiners would possibly not pay freight charges and cargo premium. It will also give them secured supplies," said a trader, who did not want to be named. With China reducing imports rapidly, Asia's gas oil market faces a supply glut which pressures down physical differentials. Asia’s gas oil contango tumbled on Tuesday to the deepest level in a two and a half years, dogged by poor regional demand and heavy supply.Reliance is setting up an export-focused 580,000 barrels per day refinery next to its existing export-oriented 660,000 bpd plant in western India. Officials said the government would consider state firms' request to buy fuel from Reliance. "In principle this issue (sales by Reliance to local firms) will be talked with the commerce and finance ministries," Pandey said.

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