BMI View: Faced with strong political opposition, the Indian government has so far proved unable to abolish diesel subsidies. Although the abolition of subsidies is still distant, a move to introduce differential diesel pricing would be an important step towards removing subsidies for those consumers who can afford market prices. India is considering its frst move to amending its expensive diesel subsidy programme, having announced that it is looking for ways to restrict the use of subsidised fuel by the commercial sector, power generation and luxury-car owners. Although India has theoretically freed up gasoline prices, diesel has proved a political step too far for the government. The relatively less controversial policy of differential pricing would allow India to reduce its subsidy bill while minimising public antagonism to more expensive fuel.
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