The rupee’s fall and rise of crude oil prices pushed up the under recovery on diesel to Rs. 10.22 per litre, up from Rs. 9.29 per litre on August 1.
With the crude oil prices firming up in the international markets and the rupee struggling against the dollar, oil marketing companies (OMCs) are no longer happy with the fortnightly 50 paise hike in diesel prices, and are pressing the Petroleum Ministry for a Rs. 2 to 3 per litre hike.
The OMCs have already told the Petroleum Ministry that it was no longer possible to sustain the current situation as they are incurring a loss of Rs. 10.22 paise per litre on diesel.
Unlike petrol, that stands de-regulated, diesel prices are presently under administrative control although the government earlier gave a mandate to OMCs in January this year to hike diesel prices by 50 paise per litre every fortnight.
Interestingly, the under-recovery on sale of diesel has come down to Rs. 3.80 paise per litre in May this year.
However, the tumbling of the rupee and rise of crude oil prices have pushed up the under-recovery to Rs. 9.29 per litre as on August 1, which now stands at Rs. 10.22 per litre on August 16.
Officials in the Petroleum Ministry said the OMCs have proposed a hike of Rs. 2 to 3 per litre in price of diesel. “It is a political decision, and has to be taken at the highest level. The OMCs are bleeding and there looks no other alternative but for a substantial hike in diesel prices.
“A one rupee fall in the rupee would cost the OMCs Rs. 9,000 crore a year in the form of under-recovery, while every $1 increase in crude oil prices would add another Rs. 5,000 crore annually to the subsidy burden,” the official added.
According to a review carried out by the Petroleum Planning and Analysis Cell (PPAC), the under-recovery on PDS Kerosene and Domestic LPG for August remained at Rs.33.54 per litre and Rs.412 per LPG cylinder.