"Those who can afford it should pay the full fuel price"Noble thought. Difficult or maybe impossible to implement across the country. But how about implementing it for just the Government (including State Govts) and its organizations. The Govt organizations raises tenders for fuel supply for its vehicles and whosoever is the lowest bidder, gets the contract for fuel supply. So the total requirement is always known. Instead of paying the bidder by the prevailing (subsidized) market rate, why not pay the bidder by the unsubsidized market rate.
Lets see if it makes sense or not.
This news article says that the first three quarters of FY 09-10, the petroleum ministry demanded a subsidy of Rs 20,872 crore to take care for the losses of three Oil & Gas PSUs. Extrapolating the annual subsidy could be assumed to be around Rs 28,000 crore.
Govt of India have more than 50 lakh employees assuming an average of 1 car per 10 employees, the Govt will have around 5,00,000 cars. A typical govt official's car will run for around 40,000 kms per year (including transit from office to home and tours). Assuming a mileage of a 6kms (ambassadors won't give more than that). Diesel cost would be
500000 * 6700 * 36 = Rs 12060 Crores.
Difference between actual and subsidized price of diesel varies depending on the global crude price. At the price of $75 the loss for Oil companies on Diesel was around Rs 9/litre.
So if the Govt were to buy the fuel at market rate the loss of Oil companises will be reduced by around Rs 3000 Crores which is more than 10% of the annual loss.
To me this seems a good way to reduce the subsidy bill.