A high level panel led by former Planning Commission member Kirit S Parikh has recommended deregulating diesel prices in two years and has suggested increasing diesel prices by Rs. 1 in order to gradually bring the local prices in line with the global prices of the fuel.

The panel wrote in its draft report that the government must continue to use the current system of calculating revenue losses on the basis of trade parity or weighted average price of import and exports of the fuel. Government officials said that the panel did not favour linking the prices to export-parity.

At present, the state-run oil marketing firms calculate fuel prices on the basis of landed price of imports that includes customs duty. Officials from the oil ministry said that the panel wants the government to adopt an Export Parity Pricing for Diesel. They said that the practice is not followed anywhere in the world. Officials have said that the report is almost ready and officials will meet once again before submitting the final report.

The government still controls the price of diesel, cooking gas and kerosene but has deregulated the price of petrol.