Diesel price may be hiked by Rs 2-3 per litre: report

The government is mulling a one-time hike of Rs 2-3 per litre in diesel prices to offset the impact of fall in rupee value but there is no proposal to raise cooking gas (LPG) and kerosene rates.

The one-time hike, if approved by the Cabinet, will be over and above the 50 paisa per litre increase in rates that happen every month to cut down the difference between cost of production and retail selling price.

"There is certainly a case for raising diesel prices. But it will have to be a political decision," a top Oil Ministry official said.

The government had in January allowed oil companies to raise diesel rates by up to 50 paisa per month till such time that the losses on the most consumed fuel in the country are wiped out.

With prices being raised regularly, the losses on diesel had come down to below Rs 3 per litre in May but rupee falling by 12 per cent since April has resulted in the difference climbing to Rs 9.29 per litre.

"Clearly, the 50 paisa increase is not sufficient. We need to do more," the official said.

State-owned fuel retailers Indian Oil, Bharat Petroleum and Hindustan Petroleum have suggested raising the monthly quantum to cut losses.

Oil Minister M Veerappa Moily said the one-time and oil company suggestions are under consideration but no decision has been taken yet.

"That's under consideration, but we have not yet decided," he said.

Mr Moily, however, said there is no proposal to raise LPG or kerosene rates.

Diesel price was last hiked on August 1 when prices in Delhi went up by 56 paisa (after including local taxes) to Rs 51.40 per litre.

The August 1 hike was seventh since the January 17 and all losses on diesel sales should have been wiped off by now to make the fuel market priced. But the fall in rupee, 12 per cent since April, has worsened the situation and oil firms are losing Rs 9.29 per litre despite prices being raised by a cumulative Rs 3.75 this year.

In addition to diesel, oil marketing companies continue to suffer under-recovery or revenue loss on sale of PDS kerosene of Rs 33.54 per litre and Rs 412 on sale of 14.2-kg LPG cylinder.

The official said oil firms were expected to incur under-recovery of Rs 80,000 crore on sale of the three sensitive products (diesel, LPG and kerosene) but now it is estimated to cross Rs 128,500 crore.