Diesel deregulation soon to be a reality

New Delhi: Setting stage for full deregulation of diesel in next three months, petroleum ministry said on Monday that under-recovery on it has fallen to Rs 1.62 per litre. If Iraq crisis doesn’t push crude oil prices unusually high and depreciate Indian Rupee too much; after petrol, diesel could become a de-regulated commodity.

Petroleum Planning and Analysis Cell (PPAC), an arm of the petroleum ministry said that losses on diesel has come down from Rs 2.80  per litre  to  Rs 1.62  per  litre in second fortnight of June.   

There is also speculation that government may go for one time hike in diesel prices to de-regulate it at one go rather than to wait for 50 paise per litre monthly hikes.

However, the Indian rupee weakened to its lowest level in more than a month on Monday. Crude oil prices have also shot up. So one will need to wait for 15 days until the next review to see how things will pan out. Whether the oil markets recover from the shock of Iraq crisis or things become worse will become clear by the next review. Iraq is the second largest oil producer in the OPEC. The country is likely to provide 60 percent of the OPEC’s growth for the rest of this decade.

The UPA government had in January, 2013 decided to raise diesel prices in small doses of 40-50 paisa a litre every month till the losses on its sale are completely eliminated. Petrol price was deregulated in June 2010.

Oil marketing  companies (OMCs)  are  now  incurring  combined  daily under-recovery of about Rs 249 crore on the sale of diesel, PDS kerosene and domestic LPG. This is less than Rs 262 crore daily under-recoveries during previous fortnight. The under-recoveries for the financial year 2014-15 are projected to be Rs 91,665 crore while the figure was Rs 1, 39,869 in the 2013-14.

In the case of kerosene under-recoveries continues to be Rs 32.87 per litre and domestic LPG at  Rs 432.71 per cylinder as in the last fortnight.