Scotching rumours of a cut in diesel prices that were rife on Wednesday, the government yesterday clarified that it has no immediate plans to cut diesel prices. However, petroleum minister Murli Deora told reporters that he would not rule out a price review at a later date.

"As of now there is no plan to cut prices. We have not yet decided on this," Deora said, even as there were ample indications that it may not hesitate to cut prices even after the model code of conduct for the general elections comes in force.

"There is no proposal in the ministry of petroleum and natural gas on price changes at present," oil secretary R S Pandey told reporters in New Delhi. However, he too did not rule out the possibility of a reduction, as state-owned oil firms earning a clear Rs3.26 per litre profit on diesel sales.

"All I am saying is there is no proposal as of now. I have nothing more to add to that," he said. Earlier, there were indications that the cabinet may decide on reduction in prices at its meeting on Thursday. "Unfortunately, it was not on the agenda," Deora said.

Home minister P Chidambaram, who briefed reporters on the Cabinet decisions, said in his opinion there was no bar on the government from announcing a price cut even after polls are announced. "In my view, there is no bar (on such decisions)," he said.

The price of diesel has been cut by Rs 4 a litre in two equal installments since December but there is no finality yet, while petrol rates have been slashed by Rs10 a litre. A reduction in diesel price would pull down inflation and make goods transportation, especially fruit and vegetables, cheaper. However, there is no proposal for a corresponding cut in petrol prices.

State-owned fuel retailers Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum are reported to be selling petrol at almost break-even prices, while they make their profit on diesel sales.

"There is a scope for reduction in diesel rates only," an official said. On petrol the margins are just Rs 0.08 per litre. The three firms are currently making Rs36 crore per day profit on diesel sales, enough to counterbalance the Rs 24 crore per day loss on kerosene and Rs 9 crore (Rs 90 million) on domestic LPG.

Kerosene is being sold at a loss of Rs11.70 per litre and LPG at a loss Rs77.51 per 14.2-kg cylinder.