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Oil firms smiling, but no diesel price cut

Last Updated 16 September 2014, 17:49 IST

After years of incurring losses on the sale of diesel, the state-owned companies on Tuesday began to gain 35 paisa per litre on sale of diesel but it is unlikely that the benefit will pass on to the common man anytime soon.

“The diesel under-recovery  has been wiped out and there is over-recovery of 0.35 rupees per litre  with effect from September 16,” an official statement said.
This has been made possible due to a 50 paisa/litre hike per month on sale of diesel for the past 19 months. There were expectations that prices of diesel will be freed once the losses are wiped out, but the wait has got longer apparently because of Assembly elections in two major Congress-ruled states of Maharashtra and Haryana.

“Diesel deregulation is likely after Assembly polls. This is certainly not a popular decision,” sources in the oil ministry said. Oil Minister Dharmendra Pradhan is away in Vietnam and a Cabinet decision on freeing prices can come only in his presence. The deregulation of diesel will give oil companies powers to change rates in tandem with international prices of crude like in case of petrol since June 2010.

Oil companies calculate the desired retail selling price of petrol and diesel on 1st and 16th of every month based on average international benchmark price and rupee-dollar exchange rate. The next revision in diesel and petrol prices is due at the month end.

A rising subsidy bill and strained public finances in a sluggish economy forced the Cabinet in January 2013 to allow state retailers to marginally raise diesel prices each month.

"We tinker with diesel prices once a month... there is a case for a cut in diesel prices towards the end of the month but a decision is yet to be taken on that," the source said.

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(Published 16 September 2014, 07:52 IST)

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