oil aNd ENErGy// The government has lifted diesel price controls and raised the cost of natural gas, giving market forces greater sway as it seeks to attract energy investment, boost competition and cut subsidy costs. The decisions marked some acceleration in reform measures by Prime Minister Narendra Modi. Lower prices of diesel and a smallerthan- expected rise in local gas rates will help Modi fulfil an election pledge to curb inflation and pull India’s economy out of its longest slowdown since the 1980s.

A litre of diesel will cost about 5.7 per cent, or 3.37 rupees ($0.05) less for consumers, while prices of locally produced gas will go up by a third from next month. The first cut in diesel prices across the country in more than five years, triggered by falling global oil prices, will further help ease inflation that is already tracking lower. Diesel makes up nearly half of India’s fuel demand and its usage is set to rise as Modi wants to boost the employmentgenerating manufacturing sector to generate growth and jobs.

Diesel deregulation will significantly reduce subsidy payouts by Oil and Natural Gas Corp, GAIL (India) Ltd and Oil India Ltd. These companies sell crude and refined products to state refiners at discounted rates to partly compensate them for losses on fuels sales at regulated prices. The move to market-based pricing will boost the role of private players like Reliance Industries and Essar Oil in India’s retail arena.

The government has reworked the gas pricing formula approved by the previous Congress-led government and restricted the rise in local gas prices to $5.61 per mmBtu from November 1. The prices will be revised every six months. The previous government had suggested for raising domestic gas prices to $8.4 per mmBtu from the current $4.20 per mmBtu. About 80 percent of the additional revenue due to revision in gas prices will go to state-run companies ONGC and Oil India.