New Delhi, Feb 7 (IANS) Under-recoveries due to subsidised sale of diesel will end by mid-2015 following progressive increase in price of the fuel, Planning Commission Deputy Chairman Montek Singh Ahluwalia said Thursday.

"Diesel is on a progressive elimination of subsidies and by mid-2015, present under-pricing of diesel will be removed," Ahluwalia said in his address here at India Energy Congress.

The government last month partially deregulated diesel prices, allowing oil marketing companies to make small corrections in price every month to recover losses at the rate of Rs.10 per litre currently on sales at subsidised rates.

Emphasising the need for raising domestic fuel prices, Ahluwalia said diesel, liquefied petroleum gas (LPG), coal and natural gas are under-priced in India.

"Indian coal is under-priced, some part of coal is sold through auction and the auction price is 30-40 percent higher. If this under-pricing is not altered, then...incentives to invest have to be maintained by giving budgetary sops which is simply not feasible," he said.

The Planning Commission believes energy subsidies are a luxury that poorer countries can no longer afford, he said.

"Rich countries can afford to have energy subsidies because it will not prevent them from becoming richer. But poorer countries, that want to get richer, cannot continue with it," Ahluwalia said.

"We can't look at energy as an isolated issue...we have to get power, coal, gas all working together. It will not be possible to manage energy demand without energy efficiency."

Ahluwalia said there is a need to stimulate supply of non-conventional resources of energy as it is a must to have continuous supply of energy.

"The (energy) resources are scarce and finite and the capacity for growth and our ambitions are very high," he said.

He said the government is exploring the potential of shale gas, though the initial assessments have not been very encouraging.