Diesel rate likely to be cut by Re 1/litre, petrol by Rs 1.75

New Delhi: Diesel price is likely to be cut by about Re 1 per litre, the first reduction in rates in over five years, while petrol price may be slashed by Rs 1.75.  State-owned oil firms are likely to announce reduction in rates, made possible because of softening in international oil rates, this evening, government and industry sources said.  Under-recovery or the difference between retail price and its imported cost was wiped out and there was an over-recovery of 35 paise a litre from September 16.

This over-recovery is now about Re 1 a litre. While the government had resisted the temptation to cut rates then, prices are likely to be reduced at the fortnightly review due today. Sources said oil ministry is of the view that while the Cabinet Committee on Political Affairs (CCPA) had on January 17, 2013 allowed a monthly increase in diesel price of 40-50  paise per month to wipe out the under-recovery, it wasn't  envisaged that there would be over-recovery. 

It wants to reduce diesel price to protect state-owned oil companies' market share, which may be lost to private retailers who would be selling diesel in tandem with  international prices. Oil Minister Dharmendra Pradhan is believed to have  already written to Prime Minister Narendra Modi on the  emerging scenario. Also, it has written to the Election Commission seeking their concurrence for the price decrease in  view of state assembly elections in Maharashtra and Haryana. 

This would be the first reduction in diesel rates in over  five years. Diesel rates were last cut on January 29, 2009 when they were reduced by Rs 2 a litre to Rs 30.86. Since then rates have only increased as international oil  prices climbed.

Since January 2013, diesel prices have been  raised by up to 50 paise a litre every month to eliminate  under-recoveries.  Like diesel, state-owned oil companies had also not  changed petrol rates on September 16 though it warranted a 54  paise increase as its benchmark gasoline rates had firmed up  in international market.  This is perhaps the first time that retail prices in India  are higher than global rates.

Originally, petrol and diesel prices were deregulated in   April 2002 when NDA government was in power. Administered   pricing regime, however, made a back-door entry towards the   end of NDA regime in the first quarter of 2004 when crude   prices started inching up.  

Congress-led UPA 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 decided to deregulate diesel   prices in stages through monthly 50 paise a litre increases.  

Rates were last raised on August 31 after which losses have been wiped out.   Rates have cumulatively risen by Rs 11.81 per litre in 19   instalments since January 2013.