A hefty cut in diesel price is expected to bring down road and rail freight tariff.NEW DELHI: Pump price of diesel will go down by about Rs 2.50 a litre shortly after the model code of conduct ends with elections in Maharashtra and Haryana, even as state-run fuel retailers announced a Re 1 per litre cut in petrol price on the back of continuing slide in global crude. Though a cut in diesel price has been anticipated ever since fuel retailers started making profit on the fuel about a month back, a definitive indication came from oil minister Dharmendra Pradhan on Tuesday.
"The government will take the right decision at the right time ... As you are aware, election code of conduct is in place so we will decide on the issue at the right time," Pradhan said in reply to a question.
A hefty cut in diesel price is expected to bring down road and rail freight tariff. Since this coincides with the time winter crops and vegetables start flowing into markets, the impact at the consumer level is expected to get amplified by way of a reduction in the prices of food items.
On the macroeconomic front, low oil prices will reduce the oil import bill, meaning lesser outflow of foreign exchange. This will ease current account deficit. The fuel subsidy burden will also come down drastically. All these will have a positive bearing on the government's fiscal deficit situation, which in turn will reduce the imperative to hike taxes and a positive impact on interest rate regime.
All these will happen even without officially deregulating diesel, though pressure from private fuel retailers to open up the market will increase. It remains to be seen whether the government deregulates diesel quickly or prefers to wait and watch the shifting sands of the global oil market.
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