With the Assembly election process in Maharashtra and Haryana coming to a close, the Centre appears set to reduce the diesel price. The retail price can be cut by at least a rupee a litre.

The idea is to offer a Diwali gift to consumers, sources within the Government as well as the ruling BJP said, adding that “consultations (within the decision makers) are going on whether it will be done in two instalments.”

Today, the three oil PSUs – Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation – are earning ₹1.90 on every litre of diesel sold (over-recovery) following the steep fall in international crude oil prices. It remains to be seen how the Government will pass on the benefits of this drop to diesel consumers.

It is not clear if the Petroleum & Natural Gas Ministry will need Cabinet nod to bring down the retail prices to reach parity with the global rates. Earlier, it had been instructed to raise diesel prices gradually till they were on a par with international rates.

While the PSUs remained non-committal, Minister for Petroleum & Natural Gas Dharmendra Pradhan said, “you will get all answers tomorrow (Wednesday).” The Union Cabinet usually meets on Wednesdays. The decision on a politically-sensitive issue, such as diesel pricing, is generally taken by the Cabinet Committee on Political Affairs.

Oil retailers review auto fuel prices fortnightly. However, for diesel the revision has been happening on a monthly basis. Diesel prices are regulated by the Government to keep inflation in check. This has also resulted in distorting the market, with private firms such as Reliance Industries and Essar Oil taking a hit. Sources in the private sector say that “diesel at our retail outlets is sold at close to PSU rates.”

A decision to cut the diesel price will earn the Modi-led Government brownie points vis-a-vis the previous regime, as the last reduction in diesel price was done in January 2009.

(Inputs from Debabrata Das)

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