Prime Minister's economic advisory panel has said that diesel prices should be freed from government control "as early as possible", a suggestion if accepted will lead to a price hike of Rs 2.87 per litre.
"I think the sooner it (deregulation of diesel prices) is done the better... I think it should be done as early as possible," Prime Minister's Economic Advisory Council (PMEAC) Chairman C Rangarajan told PTI.
The government had on June 25 deregulated petrol price and said the same for diesel will be done soon. But with inflation rate continuing to remain at unmanageable levels, the government put-off the decision as any further hike in diesel price would lead to cascading effect.
At present the retail price of diesel is Rs 2.87 a litre short of cost of production.
Oil Secretary S Sundareshan earlier this week stated that "there is no thinking at this juncture" to deregulate diesel prices as "it will be unfair" to increase rates when inflation is already high.
Finance Secretary Ashok Chawla had also said that it will not be a wise or prudent thing to deregulate price of diesel at a time when inflation is running so high.
Wholesale price inflation rose to 8.62 per cent in September from 8.51 per cent in the previous month.
Rangarajan said it would be appropriate to deregulate diesel prices when inflation reaches 7 per cent from 8.62 per cent, adding that inflation is likely to reach 6.5 per cent by December.
The government, on June 25, had decontrolled petrol price and had said that diesel would move in free price regime shortly. At that time, an ad-hoc Rs 2 a litre increase in diesel price was brought into effect.
Since June 25 decision, petrol prices have been raised twice, once in September and second time during the last week to reflect the rising trend in international crude oil prices.
