Diesel prices to follow upward trend

The present issue eating up the Indian car industry is the deregulation of the diesel price. There seems to be a conflict in regards to removing the subsidy on the diesel price between the Heavy Industries minister Praful Patel and the Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia. According to Mr Ahluwalia, while diesel price regulation is still on cards, he opposes the decontrolling in a single step. He believes that de-regulation should be instigated slowly to get the consumers adapted to the regular diesel prices in a normal course of time.

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However, the Heavy Industries Minister, Praful Patel has voted for the regularisation of the diesel price in order to enhance the diesel consumption in the market with the actual diesel price. Mr Ahluwalia is also thought to have expressed his views on the diesel price regularisation on the Indo-US CEO forum at Washington DC. He is believed to have said that removing the subsidy on the diesel price is still far way as the diesel consumers and the car industry has to get used to the idea of unsubsidized diesel price.

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The Indian car industry is currently marred by the double whammy of recent petrol price hikes and increased loan rates, apart from the inflation. The Indian car market is currently witnessing a soaring diesel car demand due to the prevalent conditions. Considering the market Scenario, the move by the Government to remove the subsidy might not be recommended. Mr. Alhluwalia continues to hold his ground that while unsubsidized diesel is unavoidable condition in future, the process is likely to be delayed for some time. The present timing does not seem to be perfect as the car industry might not appreciate the move. The UPA Government also might not accommodate the outright diesel price regularisation straightaway. The Indian Government has recently increased the petrol prices by Rs 3.84 a liter to further fuel the sluggish growth in the car market. Though no concrete information is available on the LPG price hike, the rise in the domestic gas price is also anticipated in near future.

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