Govt allows oil companies to hike diesel price

Our Bureau New Delhi | Updated on March 12, 2018

M. Veerappa Moily

The decision on diesel is expected to cut the subsidy bill by Rs 12,900 crore on account of hike in price of fuel sold to bulk consumers.

State-owned oil companies in a parallel move will cut petrol price by 25 paise per litre in view of softening in cost of raw material.

Diesel prices have been virtually de-regulated, with the Government allowing oil marketing companies to make ‘small’ hikes.

However, the Government refused to term the move as de-regulation or even partial de-regulation.

No discussion on quantum

The Petroleum Ministry clarified that there was no discussion on the quantum of price increase or the period over which these changes are to be effected, at the Cabinet committee meeting held here on Thursday. It said this decision had been left to the oil companies. The Ministry also said that the Government would continue to subsidise diesel, cooking gas and kerosene.

Although the Government took an ‘in-principle’ decision to de-regulate diesel prices on June 25, 2010, it had clearly said that further increases (after the initial hike of Rs 2/litre) would be made by the public sector oil marketing companies (OMCs) in consultation with the Ministry of Petroleum and Natural Gas. Accordingly, the prices were revised a couple of times. Now, it appears that the Government has modified its earlier decision.

“As far as diesel is concerned, OMCs have been authorised to make price corrections from time to time,” the Petroleum Minister, Veerappa Moily, told reporters after meeting of the Cabinet Committee on Political Affairs. It (price correction) can commence even from today, he added.

‘Small correction’

However, Finance Minister, P Chidambaram, maintained that oil companies had been allowed to make a ‘small correction’, while adding, “I am looking at the same subsidy bill as was expected earlier.” Petroleum Secretary G.C. Chaturvedi, re-confirmed that OMCs had been allowed to raise diesel prices in small quantities over a period of time. He did not give details about the time-frame.

Chaturvedi, however, emphatically said that the Government had not de-regulated diesel prices. “If we were to de-regulate, then diesel prices will have to be raised by Rs 9.60 a litre, which is not the case. Only a small quantum of change has been permitted over a period of time.” Asked if it was partial de-regulation, he said “It wasn’t even partial deregulation.”

The administered diesel price has always been a sensitive issue with the fuel being consumed in large measure by public transport and freight carriers. It is always feared that any hike in its rates can lead to a cascading effect on prices. Prices of diesel were last revised on September 14 when it was hiked by a steep Rs 5.63 a litre. At present, diesel costs Rs 47.15 a litre in Delhi.

All three Government-owned OMCs, Indian Oil, Hindustan Petroleum and Bharat Petroleum, are selling diesel below the cost. Going by the current trend in international prices, diesel prices need to be raised by Rs 10.81 a litre in Delhi. In fact, the biggest OMC, Indian Oil, is incurring under-recovery of Rs 113 crore a day.


Published on January 17, 2013

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