The government, however, left untouched the price of petrol and kerosene.
Faced with the task of bringing down the ballooning oil subsidy, the governemnt for the first time introduced a cap on supply of LPG cylinders of 14.2 kg that will make the consumers pay market price for cylinders beyond six.
The tough decisions, which came under immediate attack from allies like Trinamool Congress and Samajwadi Party and opposition alike, were taken at a meeting of the Cabinet Committee on Political Affairs (CCPA) chaired by Prime Minister Manmohan Singh. It will come into effect from midnight.
The government, which has been facing criticism of policy paralysis, had last hiked the price of diesel by Rs 3 a litre in June last year.
The revised retail selling price of diesel in Delhi will be Rs 47 a litre, while branded diesel will be sold at the market rate.
For the remaining part of the current financial year, the number of subsidised LPG cylinder to a consumer will be three cylinders.
A government release said that any number of LPG cylinders will be available at the market rate over the capped number of six. While the price of subsidised cylinder will continue to be Rs 399 per cylinder in Delhi, the market rate will be notified by oil firms on monthly basis.
Out of the Rs 5 increase, Rs 1.50 is on account of increase in excise duty and the balance hike will reduce the under-recoveries of the Oil Marketing Companies (OMCs) by about Rs 15,000 crore in the remaining part of the current financial year.
But even after today's hike the under recoveries on account of diesel sale in the current year is estimated to be above Rs 1.03 lakh crore, the release said. MORE
