Diesel Price Hiked by Rs 1.09/Litre

After a brief hiatus, diesel prices were on Monday hiked by Rs 1.09 a litre, excluding state levies.

The monthly increases in diesel rates, which had been put on hold just before India began voting to elect a new government, were back no sooner than polling ended on this day.

The hikes, effective from midnight tonight, are excluding state sales tax or VAT and actual increase will be higher and will vary from city to city, the oil companies announced.

Diesel price in Delhi will be hiked by Rs 1.22 a litre including taxes to Rs 56.71 per litre, while it will cost Rs 65.21 a litre in Mumbai as against Rs 63.86 at present.

State-owned oil companies, which had last hiked diesel price on March 1, will lose Rs 5.71 a litre even after Monday's hike.

The Cabinet had in January last year decided that diesel prices should be raised by 40-50 paise a litre every month until losses on the fuel are wiped out. However, oil firms skipped the hikes due on April 1 and May 1 as UPA did not want to take unpopular decision during election season.

The deferred hikes have now been implemented. Before today's increase, diesel prices had risen by a cumulative Rs 8.33 a litre in 14 instalments since January 2013.

There will be no change in petrol rates even though the oil firms were losing about 50 paise a litre due to depreciation in value of rupee against the US dollar.

Oil PSUs Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Ltd (HPCL) had on April 1 skipped raising diesel rates as per the January 2013 decision of small monthly raises, on the plea that revenue losses on the fuel have dropped below Rs 6 a litre.

They again did not raise rates on May 1 even though the losses had climbed to Rs 6.80 per litre.

The Oil Ministry had at the time of shelving the April hike stated that an expert committee headed by Kirit Parikh recommended that government provide a fixed subsidy of Rs 6 per litre on diesel and so there was no need to raise rates if the revenue losses were below this threshold.

While the government is yet to accept the Parikh panel recommendations, the Oil Ministry, wary of the political fallout due to the unpopular move to raise prices, approached the poll watchdog towards March-end seeking its nod to keep monthly raises in abeyance.

The Election Commission did not respond to the ministry's request for over a month, a development that was cited to yet again for not raising fuel rates on May 1 even though losses had surpassed the Rs 6 a litre threshold.

The Election Commission has now told the ministry that since the revenue loss on the fuel is currently Rs 6.80 per litre, it is for the Oil Ministry to take a decision on raising rates.

"As a sequel to the under-recovery on diesel having fallen below Rs 6 per litre, Ministry of Petroleum and Natural Gas had referred the matter to Election Commission of India on March 31, 2014. Accordingly, PSU oil marketing companies did not increase prices of diesel on April 1, 2014 and May 1, 2014," said Indian Oil Corp, the country's largest fuel retailer.

"As the proposed change has not been accepted by the Election Commission, the oil marketing companies are required to effect both the price increases together."

IOC said even after Monday's increase, oil firms will have an under-recovery (revenue loss) of Rs 5.71 a litre on diesel. Diesel rates had risen regularly barring just one time.

Oil companies skipped raising diesel prices in April 2013, when assembly elections were held in Oil Minister M Veerappa Moily's home state Karnataka. However, they made up by hiking diesel prices by 90 paise in the following month.