Diesel prices may be hiked by up to Rs 1 a litre

Diesel prices may be hiked by up to one rupee a litre after Election Commission rejected the Oil Ministry's proposal made on the eve of elections to shelve the monthly increases in rates.

Oil PSUs IOC, BPCl and HPCl had on April 1 skipped raising diesel rates as per the January 2013 decision of the Cabinet 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.

Sources said the 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.

Sources said 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.

With polling ending today, the Oil Ministry is now likely to ask the oil firms to announce the two deferred increases, sources said.

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. Diesel prices have risen by a cumulative Rs 8.33 a litre in 14 instalments since January 2013.

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.

Sources said the oil companies had decided not to raise petrol prices on May 1 even though rupee depreciated against the US dollar, thereby making imports costlier.