After the Cabinet refused to take a call on increasing the price of diesel, kerosene and LPG, putting the onus on oil marketing companies to decide on diesel prices from time to time, sources told CNN-IBN that diesel prices would be hiked by 40-50 paise per litre every month.
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.
According to CNN-IBN reports, 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.
The Opposition, however, wasn't satisfied with the government's decision. Terming the decision as "unjustified", BJP said it would have a cascading effect on various sectors resulting in all round price hikes.
"It will increase all transport costs for passengers as well as on goods. It will increase costs of irrigation, tractors and other agricultural inputs," BJP spokesman Prakash Javadekar said.
CPI(M) General Secretary Prakash Karat said the steps towards deregulation of diesel prices will put additional burden on the common man. "This will lead to continuous increase in the prices of diesel just as it happened with the prices of petrol after deregulation," he said.
Karat said the rise in the prices of diesel will impact on transport and increase inflation and also affect farmers adversely.
With inputs from PTI