Diesel price to keep rising every month: Moily

Furthering its push for cutting India's oil subsidy burden, the government announced today that diesel prices will be hiked by 40-50 paise a litre every month till losses to the oil marketing companies are completely wiped out.
 
"Until further orders, oil marketing companies can increase it (diesel price) by 40-50 paise (per litre) every month," petroleum and natural gas minister M Veerappa Moily told newspersons in New Delhi.

The government had first made a move towards matching diesel prices to cost of production on 17 January, when it allowed the three state-owned retailers some leeway to determine diesel prices without state interference.

Moily today clarified that the reform in this direction will be continued, despite the temporary inflation problems that it is bound to cause. It can be expected that investors will cheer his statement, while opposition politicians will cry foul and the average consumer may not be happy with the hike in bus fares that the move involves.

The oil marketing companies currently lose almost Rs11 on every litre of diesel they sell. The fuel currently costs Rs47.65 a litre in Delhi; prices in other states are higher - or in some cases lower - depending on local taxation.

Moily did not clarify as to when the retailers will be allowed to put the second price increase into effect.

The decision on allowing retail price hikes comes on the heels of a decision to charge bulk consumers like defence, railways and state transport undertakings the market price, which is almost Rs10 a litre more than the retail price of diesel.