Diesel prices deregulated, linked to world prices
This is the first reduction in diesel rates in over 5 years
By : DC Correspondent
Update: 2014-10-19 02:01 GMT
New Delhi: Around four years after petrol was deregulated, the Cabinet on Saturday decided to make diesel prices market-linked. Consequently, due to the fall in global oil prices, diesel price was cut by Rs 3.37 a litre from Saturday midnight.
This is the first reduction in diesel rates in over five years. The oil marketing firms are now free to determine the selling price of diesel in the domestic market. Any rise in the world oil price or fall in the value of the Indian rupee against the US dollar will result in an increase in diesel prices.
The other effect of the decision to free the prices of petrol and diesel will mean that the PSU oil marketing companies’ monopoly on the sale of fuel will be now challenged by private players. Till now, the number of private petrol pumps was minuscule as PSU-owned pumps were selling fuels at subsidised rates.
“Diesel deregulation will bring private oil marketing firms’ retail network into the system. This will help the consumer,” Essar Oil MD and CEO L.K. Gupta said.
Diesel in Delhi will now cost Rs 55.60 a litre from 58.97 per litre, a decrease of Rs 3.37 a litre. In Mumbai, the diesel price cut comes to Rs 3.72 a litre and will cost Rs 63.54 a litre. In Kolkata, the price cut comes to Rs 3.51 per litre and in Chennai to Rs 3.65 a litre. The process to deregulate diesel price was started by the UPA-2 government.
On January 17, 2013, the Cabinet allowed a monthly increase of 40-50 paise per litre in diesel price till under-recovery on it was completely exhausted. In recent days, there has been a sharp fall in international crude oil prices, which resulted in over-recovery in diesel sale for PSU oil marketing companies. The government used this as an opportunity to bring the long-pending reform in the oil sector.
However, under-recoveries continue on kerosene and LPG. In the case of PDS kerosene and domestic LPG, the under-recoveries for the second fortnight of October 2014 will be Rs 31.22 per litre (Rs 32.67 per litre last month) and Rs 404.64 per cylinder (Rs 427.82 per cylinder last month). State-owned fuel retailers, IOC, BPCL and HPCL are losing about Rs 139 crore a day on the sale of PDS kerosene and domestic LPG.