Diesel price to be raised by 50 paise per litre every month

Government on Thursday allowed oil companies to raise diesel price by 50 paise a litre per month and bulk users to be charged market price. Petrol price will also be cut by 25 paise per litre. Facing flak over move to raise diesel price, government on Thursday said it was a "very difficult" balancing act of generating revenue and protecting people's interest and questioned parties' opposition to the hike when they themselves had effected similar decisions in the past. The price of diesel will now increase by Rs 6 in a year. The new price would be effective from Friday, reports said. However, the government has told oil manufacturing companies to sell diesel to bulk buyers at market rate.

The state fuel retailers are expected to cut petrol prices by 25 paise per litre from Friday itself. The decision on diesel is expected to cut the subsidy bill by Rs 12,900 crore on account of hike in price of fuel sold to bulk consumers like Railways and state transport undertakings. Diesel accounts for 59 per cent of the estimated Rs 160,000 crore fuel subsidy bill in 2012-13. An order issued by the Oil Ministry post CCPA decision stated that bulk users be charged market price, that will result in a hike of Rs 10.81 per litre over and above the current rate of Rs 47.15 in Delhi. The government is expected to save about Rs 9,000 crore of raise in price for retail buyers.

Oil and Natural Gas Minister M Veerappa Moily had earlier said that the oil marketing companies can now decide on diesel price and change it by a small margin from time to time. Moily said, “We have now given liberty to all oil marketing companies to go in for small correction in days to come. The companies are at a liberty to do small corrections – considering all aspects.” “We have taken a first and decisive step oil companies will take a decision when full deregulation will be done,” he further said. Declining to clarify on the quantum of change in diesel price, Moily said that it is up to the oil marketing companies to decide on the amount. Moily said that the oil companies have been permitted to raise diesel prices by a small quantum periodically till such time that they are able to cover Rs 9.60 per litre loss they incur on the fuel.

The Oil Ministry had earlier this month made a proposal to Cabinet to raise diesel prices and increase the number of subsidised LPG cylinders available to households to nine a year from the current cap of six. Meanwhile, the Cabinet also approved the Petroleum Ministry’s proposal to increase the number of subsidised LPG cylinders available to households to nine a year from the current cap of six.

The government had sought permission from the Election Commission on Wednesday as three states – Meghalaya, Tripura and Nagaland – will go to polls soon and the model code of conduct is in force. Giving its approval, the Election Commission said the decision was not a violation of code as it was an ongoing scheme. With effect from April 2013, all households will be get nine subsidised cylinders instead of the earlier six.