Diesel price to go up by Rs3.14 per litre on deregulation

Oil secretary S Sundareshan said the government had not decided to limit the subsidy on diesel to Rs1.50 per litre and pass on the remaining required hike to consumers. "The decision of the EGoM is that diesel price will be market-determined. The actual decontrol will happen in future", he added

Diesel prices will have to be hiked by another Rs3.14 per litre if the government is to implement its decision to decontrol diesel rates, like it has done in the case of petrol, reports PTI.

When an Empowered Group of Ministers (EGoM) on 25th June decided to raise diesel price by Rs2 per litre in preparation for an eventual freeing of rates from government control, the gap between domestic rates and the imported cost was over Rs3.50 per litre.

The calculations done on 25th June were mostly based on the average international price in the first fortnight of June.

After the hike, the gap had narrowed to just Rs1.50 a litre.

"Today, the under-recovery on diesel is Rs3.14 per litre," Indian Oil Corporation (IOC) chairman B M Bansal said on Thursday.

This is because from 1st July, the rates are calculated on the basis of the average of the second fortnight of June, when global oil prices had firmed up.

Mr Bansal said the under-recovery on kerosene is Rs15.60 per litre, while it is Rs201.80 per 14.2-kg liquefied petroleum gas (LPG) cylinder.

IOC, Bharat Petroleum and Hindustan Petroleum were projected to lose around Rs53,000 crore on selling fuel below cost this fiscal after the EGoM decision to free petrol price led to a Rs3.50 a litre hike in the rates in Delhi, an Rs2 per litre increase in diesel prices, an Rs3 per litre rise in kerosene rates and a Rs35 per cylinder increase in the cost of LPG.

But the industry is now projected to lose Rs57,700 crore this fiscal on selling diesel, LPG and kerosene below cost, with IOC alone projected to lose Rs32,250 crore in 2010-11.

Oil secretary S Sundareshan said the government had not decided to limit the subsidy on diesel to Rs1.50 per litre and pass on the remaining required hike to the consumers.

"The decision of the EGoM is that diesel price will be market-determined. As of now the price has been raised by Rs2 per litre. We are following that," he said.

The actual decontrol will happen in "future", he said, without giving a timeline.

The talks of limiting subsidy on diesel to Rs1.50 per litre was a "personal opinion" of chief economic advisor Kaushik Basu, he said.

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