Diesel price likely to be cut by Rs 2.50/litre after state polls

New Delhi: A Rs 2.50 per litre cut in diesel prices, the first in over four years, is likely after results of assembly polls in Maharashtra and Haryana are announced on
Sunday.

Petrol price, which unlike diesel is a deregulated commodity, is likely to see a price reduction of about Re one a litre at the next scheduled revision due tomorrow.

“The government will take the right decision at the right time,” Oil Minister Dharmendra Pradhan said when asked about the impending diesel price cut.

Diesel, the nation’s most consumed fuel that has a direct bearing on prices of essential commodities as it is the preferred fuel for the transport sector, is regulated or controlled by the government.

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The fall in international oil rates last month led to situation where state-owned oil firms started making profit on diesel sales, the first time in history.

However, the benefit could not be passed on to consumers as the model code of conduct had come into place with the announcement of elections to Maharashtra and Haryana assemblies.

Since reduction in rates would have been a new policy, a revision was deferred.

“As you are aware, election code of conduct is in place so will decide on the issue at the right time,” Pradhan said without elaborating.

Asked if rates will be cut, he retorted, “Wait for the decision which we will take at the right time.”

Benchmark Brent crude today fell to the lowest level in almost four years after the International Energy Agency said oil demand will expand this year at the slowest pace since2009. Brent crude price declined $1.36, or 1.5 per cent, to $87.53 a barrel in London trading.

The drop in rates will result in the profit on sale of diesel expanding from Rs 1.90 a litre calculated based on the average rate prevailing in the second half of September.

Despite wiping out under-recoveries, or the difference between retail selling price and its imported cost, on sale of diesel on September 16 and the subsequent resultant over-recovery to Rs 1.90 from October 1, the government has not cut rates due to the election code.

Petrol, on the other hand, had been deregulated in June 2010 and rates have since then moved every fortnight in tandem with the cost. Petrol rates were last cut by 54 paise on October 1 in line with international trends.

Sources said a petrol price revision will take place on its due date of October 15 as per the practice of fixing rates on 1st and 16th of every month based on average international prices in the previous fortnight.

While the diesel price review will take place the same day, a cut in rates will not be announced till counting of votes on October 19 as the election code remains in force.

Though desired diesel prices are also calculated as per the fortnightly formula, the commodity continues to be under government control.

Sources said the Oil Ministry is of the view that while the Cabinet Committee on Political Affairs (CCPA) on January 17, 2013, allowed a monthly increase in diesel price of 40-50paise per month to wipe out the under-recovery, it wasn’t envisaged that there would be over-recovery.

Despite the over-recovery, diesel prices have not been deregulated or freed yet.

Oil industry wants diesel rates to be reduced to protect their market share which they otherwise would lose to private retailers, who price the fuel in tandem with internationalprices.

PTI