The difference between RIP and the ex-mill price of Rs 32 per kg, which is capped for two years, will be given as subsidy to states.
The move will also mean increased expenditure for the government as it provides sugar to the poor at subsidised rates.
His comments came hours after Petroleum Minister Veerappa Moily said there is no question of roll-back of the decision.
Veerappa Moily said that the government is following the suggestions of the Kelkar committee which advised total decontrol of diesel pricing.
Chief Economic Adviser Kaushik Basu had also advocated the idea of diesel prices going on a float like petrol.
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