 "Diwali gift: Govt may cut diesel prices by Rs 2.50/lt after state elections")
The long-awaited cut in diesel prices might be just around the corner.
Sources told CNBC-TV18 that the government is likely to cut diesel prices to coincide with Diwali, which falls on 23 October this year. According to PTI, a Rs 2.50 per litre cut in diesel prices and a little less than Re 1 a litre on petrol is in offing as international oil rates fell to a 27-month low.
The cut could be announced after the counting of Maharashtra and Haryana state polls. The Centre is keen to position the cuts as a ‘diwali gift’ for the public, according to sources.
If done, this will be the first rate cut in five years. Diesel rates were last cut on January 29, 2009 when they were reduced by Rs 2 a litre to Rs 30.86. Since then rates have only increased as international oil prices climbed. Since January 2013, diesel prices have been raised by up to 50 paise a litre every month to eliminate under-recoveries by oil marketing companies.
Earlier reports stated that the oil ministry was of the view that while the Cabinet Committee on Political Affairs (CCPA) had on January 17, 2013, allowed a monthly increase in diesel price of 40-50 paise per month to wipe out the under-recovery, it wasn’t envisaged that there would be over-recovery.
The ministry wants to reduce diesel price to protect state-owned oil companies’ market share, which may be lost to private retailers who would be selling diesel.
With regards todiesel deregulation, sources told CNBC-TV18 that the government may not go in for full deregulation just yet, and is keen to keep a ‘small cushion’ if crude prices rise. The government may not pass on the full benefit of the profit on diesel, which recently swelled to Rs 1.90 per litre.
Firstbiz editor-in-chief R Jagannathan had earlier argued that Prime Minister Modi should go ahead and deregulate diesel prices following the end of election season on 19 October given the sharp decline in global crude prices.
With inputs from PTI
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