As had long been expected, the government hiked the price of heavily subsidised diesel by Rs 5 per litre. The hike, which took effect from Thursday mid-night, will help oil companies slash revenue losses by around 203 billion rupees (nearly $3.7 billion).
Of the Rs. 5, excise duty will account for Rs. 1.50 while the rest of the increase will slash the under-recoveries of the Oil Marketing Companies (OMCs) by around Rs. 15,000 crore in the remaining part of the current financial year. But even after the most recent hike, the under-recoveries on account of diesel sale will remain above Rs. 1.03 lakh crore in the current fiscal.
The government also capped the number of cooking gas (LPG) cylinders that a household will be able to get on subsidised rate at six a year. After six cylinders, household will have to buy cooking gas at market price of Rs. 746 per cylinder.
Parliamentary Affairs Minister Pawan Kumar Bansal defended the move, saying it was essential to revitalize the economy and the boost investors' confidence.
But, the BJP-led Opposition criticized the move severely. BJP vice president Mukhtar Abbas Naqvi said the decisions would hit the farmers and the poor very hard. He said they would the loot of the common man by the government.
Criticizing the decisions, Naqvi said, "This is a cruel joke on the common man in the country. It has hit farmers hard during the peak paddy sowing season."
The decisions were also condemned by the government's various allies, including Trinamool Congress and Samajwadi Party.
In response, Congress said it didn't want to put pressure on the common man but the subsidy bill had soared so high that the harsh decisions became inevitable.
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