Govt hints at deregulating diesel price

After the gap between retail selling price of diesel and its imported price narrowed to 8 paise per litre, the government on Tuesday hinted at its deregulation in the coming days

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“We are getting good signals from the international market. Nothing conclusive as yet though,” Oil Minister Dharmendra Pradhan said to queries whether the prices can become market-linked once the gap was bridged.

Under-recovery on the sale of diesel narrowed to an all-time low of 8 paise per litre helped by a monthly increase on prices by 50 paise per litre and softening in international oil rates.

The decision to hike diesel prices in small dozes came into force since January 2013. But this may not be necessitated once the retail diesel price comes at par with the market price of the commodity. Finance Minister Arun Jaitley too said recently that the there was no rational in hiking prices per month once the gap was bridged signalling the oil marketing companies could be given a free hand to determine prices as in case of petrol.

Originally, petrol and diesel prices were deregulated in April 2002 when the  National Democratic Alliance (NDA) government was in power. But administered pricing regime made a backdoor entry toward the end of NDA regime in first quarter of 2004.

The Congress-led UPA government controlled rates as international oil prices went through the roof. In June 2010, however, it freed petrol price from its control and rates have since them moved more or less in tandem with cost.

In January 2013, the UPA regime decided to deregulate diesel prices in stages through monthly 50 paisa a litre increases. Rates were last raised on August 31 after which losses had dipped.

Rates have cumulatively risen by Rs 11.81 per litre in 19 instalments since January 2013.
Oil Ministry officials said once the under-recovery is eliminated, a proposal would be put to the Cabinet Committee on Political Affairs for deregulation of diesel prices as was done for petrol.

Deregulation would empower state-owned oil firms to change rates in tandem with cost like they do it for petrol.