The monthly diesel price hikes of 40—50 paise per litre are likely to continue as the new government is keen to cut the subsidy bill, a top Oil Ministry official has said.
“There is no reason why the monthly increases should be discontinued. They will continue till under-recoveries (losses) on diesel are wiped out,” the official said here.
• The next price revision is due on Saturday.
• The previous United Progressive Alliance government had decided in January 2013 to increase diesel prices in small monthly doses until the difference between the retail price and the cost of production is bridged.
• State-owned Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp currently lose Rs 4.41 on every litre of diesel sold.
• Since the Cabinet move last year, diesel prices had risen by a cumulative Rs 8.33 a litre in 14 instalments before May 12.
• The oil firms, which skipped the monthly hike in April, raised diesel prices by Rs 1.09 a litre soon after the Lok Sabha elections ended on May 12.
Losses incurred by oil marketing companies:
Fuel | May 2014 | April 2014 |
Kerosene (loss per litre) | Rs. 33.84 | Rs. 34.43 |
LPG cooking gas (loss per cylinder) | Rs. 449.13 | Rs.. 506.06 |
Besides, losses on diesel have been coming down as the rupee strengthened against the dollar. Prospects of the BJP—led National Democratic Alliance forming the government with a full majority helped the rupee to appreciate as foreign inflows increased on improved market sentiment.
If the rupee gains to 56 to a dollar, all the losses will be wiped out and the fuel will be “automatically deregulated” (free from government control), the official said. The rupee was quoted at 58.86 against the dollar in early morning trade.
According to oil ministry data, the rupee appreciated to Rs 59.47 per US dollar in the first half of May (based on which the current desired selling prices and the gap between it and retail price is calculated) from Rs 60.54 in the second fortnight of April.
Oil marketing companies, effective April 16, now incur a combined daily under-recovery (revenue loss) of Rs 318 crore on the sale of diesel, PDS kerosene and domestic LPG. This is lower than the Rs 342 crore daily under-recovery during the previous fortnight.
