Oil companies may be allowed to hike diesel prices by over 50 paise per month

Close on the heals of the proposal to increase the price of domestically-produced natural gas, petroleum minister M Veerppa Moily said he was considering a proposal to increase price of the diesel, which is currently subsidised by the government.

Speaking to a television channel, Moily said the government was considering a request by oil marketing companies to raise the 50 paise per month limit for diesel price hikes.

"That's under consideration, but we have not yet decided," Moily told the channel in reply to a question whether the government would allow oil companies to raise diesel price beyond the prescribed 50 paise a month.

State-run oil marketing companies (OMCs) are reported to be losing heavily on subsidised sale of diesel, kerosene and liquefied petroleum gas (LPG).

OMCs had last hiked diesel prices by a total of 62 paise (including taxes) on 1 August 2013, citing high international crude oil rates and falling value of the rupee.

Even after the increase, Indian Oil Corporation, the country's largest fuel retailer, said there would still be a Rs9.29 under-recovery on each litre of diesel sold through retail outlets.

Oil companies' revenue loss on diesel was only Rs3.80 per litre in May this year and the under-recoveries have been more due to weakening of the rupee, which is down more than 12 per cent since May 2013.

OMCs have raised petrol prices five times since June while they have been raising diesel prices by about 50 paise every month since 17 January.

Oil companies have been demanding a steeper hikes in diesel prices to make up their revenue losses on the fuel.