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Diesel rates may fall for first time in 7 yrs
RBI bats for deregulation of fuel * Inflation hits 5-yr low
Sanjeev Sharma
Tribune News Service

New Delhi, September 15
The monthly diesel price hike may end with under-recoveries on the fuel almost wiped out and Reserve Bank of India (RBI) Governor Raghuram Rajan batting for deregulation of its prices.

India's inflation has hit a five-year low. A fall in prices of food items brought down the wholesale price index to a low of 3.74% in August.

Rajan, however, has dampened hopes of an interest rate cut. "The prices are too high across the board...interest rates would come down at the right time when inflation has been tamed," he said.

The Indian basket for crude oil has fallen to $ 96.74 a barrel from a high of $115 a barrel in June. As a result, the under-recovery on diesel has fallen to just 8 paisa per litre coupled with the monthly hike of 50 paisa per litre in diesel prices.

"Lower crude oil prices are helping countries like us. Typically, a lower oil price means a lower current account deficit (CAD), lower oil subsidies and lower inflation. We need to seize this moment to eliminate diesel subsidies completely," said Rajan.

There are expectations that in the next round of price revision, diesel rates may be reduced for the first time in 7 years. Diesel is the country's most widely consumed fuel and a possible deregulation after wiping out under-recoveries will be a boost for the country's macro economic situation. A fall in diesel prices will also change consumer preferences for cars.

A report by Crisil Research points out that buying a diesel car makes less economic sense now as the time taken to recover the premium paid over a petrol variant has nearly doubled.





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