The 2012-13 Economic Outlook released by the Prime Minister's economic Advisory Council (PMEAC) Chairman C Rangarajan also suggested government could contemplate raising the diesel price in one or more steps.
"Priority consideration may be given to a suitable increase in the price of diesel in one or more steps," the report said while making a case for reduction of subsidy bill to contain fiscal deficit.
The government has not been able to implement its decision to deregulate diesel prices because of opposition from various quarters. It had freed petrol prices in 2010.
As regards supply of subsidised LPG cylinders, the report said it should be restricted to four per year per family.
It suggested "a cap on the level of consumption of subsidised domestic LPG close to what is currently being consumed by poorer households, i.E. 4 cylinders".
The report said the extent of under-recoveries in diesel is Rs 12.13 per litre and the subsidy per domestic LPG cylinder is Rs 231 as on August 20, 12.
A Rs 1 increase in diesel price would result in a subsidy reduction of about Rs 7,800 crore, the report said.
It further said 29 per cent of LPG subscriber households use upto 4 cylinder refills annually and if a cap of subsidised LPG refills is kept at this level, the corresponding reduction in subsidy would be roughly Rs 18,000 crore. (MORE)
