Oil Minister M Veerappa Moily said on Wednesday that diesel prices will be deregulated in six months with slow price rises.
Oil Minister M Veerappa Moily said on Wednesday that diesel prices will be deregulated in six months with slow price rises.
Speaking at the KPMG Energy Conclave in New Delhi, he said, “In six months, diesel sector will be deregulated.”
State-owned fuel retailers, who manage 95 percent of the petrol pump sales, sell diesel at government-fixed prices, which are way lesser than the cost of production.
The government had in January this year permitted them to hike the price by up to 50 paisa a litre every month as part of a plan to steadily get rid of the subsidies given on the fuel.
Moily said, “Under-recoveries (losses on diesel sales) had come down to Rs 2.50 because of monthly increases but they soared to Rs 14 as rupee depreciated sharply. Currently, under-recoveries on diesel are at about Rs 9.28 per litre.”
He added that the monthly rise in prices will carry on as planned and there was no plan for a one-time sharp hike of Rs 3 or 4 per litre to fill the gap.
At present rates, it will take 19 months to get away with all the losses on diesel sales. But Moily is sticking hopes on rupee appreciating and international oil prices turning colder for reducing this time window to 6 months.
The government had in June 2010 unchained both petrol and diesel prices from its control. While petrol rate have moved in tandem with cost except for occasional exclusions, diesel prices have not been allied with cost.
Fuel rates were last changed on November 1 when petrol prices were cut by Rs 1.15 a litre on rupee appreciation while diesel price was increased by 50 paisa.
However, industry analysts felt rising the price of diesel during poll time will be risky for the government as elevated fuel rates will fan inflation.
In addition, diesel is used by farmers, who form a big portion of electorates, to run their tractors and water pumps to irrigate crops.
Reportedly, India is the fourth largest consumer of energy in the world after China, US and Russia and is expected to become the third largest by 2025. India consumed 157.057 million tonnes of petroleum products in 2012-13.
