Diesel price for bulk consumers hiked by up to Rs. 1.25 a litre; non-subsidised LPG cheaper by Rs. 37.5 per cylinder

New Delhi: Diesel price for bulk consumers like the Railways and power plants has been hiked by up to Rs. 1.25 per litre as state-owned oil companies yet again exercised the newly bestowed pricing freedom.

This means that the Railways and power plants will have to shell out more for the fuel, and it is likely that the hike is passed on to consumers.

Neither the retail prices of diesel sold through petrol pumps nor the rate for subsidised LPG cylinders has been changed.

The government had in January allowed state-owned oil firms to sell diesel to all consumers taking supplies from their installations at market price.

Following the decision, oil companies sold diesel to bulk consumers like Defence, Railways and State  Road Transport Corporations at a rate of Rs. 58.58 per litre as compared to Rs. 48.16 per litre price of the fuel at petrol pumps in Delhi.

Industry sources said the oil firms late on Friday hiked the price of diesel for the bulk consumers by 94 paisa, excluding local sales tax or VAT. So, the actual increase for consumers will be up to Rs. 1.25 per litre.

In some relief, the price for the non-subsidised cooking gas (LPG) has been cut by Rs. 37.5 per cylinder  that consumers buy beyond their quota of subsidised bottles.

Just yesterday, Indian Oil Corp, India's largest state-owned oil company, hiked the price of petrol by Rs. 1.40 per litre, excluding taxes, effective midnight.

The last revision in diesel prices happened on February 15, when the price of the fuel was increased by 45 paise per litre.

Before this, a revision in prices happened on January 17 when the price of petrol was reduced by about 29 paisa per litre and that of diesel was hiked by about 50 paisa per litre. Earlier that day, the Union Cabinet permitted the three public sector oil marketing firms - IndianOil, Hindustan Petroleum and Bharat Petroleum - to revise diesel prices by a small quantum every month.

Oil firms lose about Rs. 450 crore every day from having to sell diesel, cooking gas (LPG) and kerosene at subsidised rates. For the full year, their total losses are estimated to be more than Rs. 1,50,000 crore. However, these oil firms get compensated for their losses from the Finance Ministry and their sister upstream PSUs such as Oil and Natural Gas Corporation, GAIL and Oil India.

In an effort to ease the burden of having to sell fuels at subsidized rates, the Finance Ministry had sent letters of comfort to IndianOil, BPCL and HPCL, detailing a payout of Rs.25,000 crore in compensation.

Of the total amount, IndianOil will get Rs. 13,474.56 crore, BPCL Rs. 5,987.25 crore and HPCL Rs. 5,538.19 crore. The Finance Ministry has already given Rs. 30,000 crore in subsidy to the companies in the first two quarters.

The actual disbursement, based on the comfort letter of the ministry, will be made after Parliament has approved the supplementary demands for grants in the forthcoming Budget session.

India is largely dependent on imports for its fuel needs. It imports 80 per cent of the crude it refines, about 3.7 million barrels per day.

In order to minimise its dependency on imports by 2030, the Oil Ministry has proposed to set up a committee under Vijay Kelkar, former advisor to the Finance Ministry, which will submit a proposal in two months. Mr Kelkar also heads a committee on fiscal consolidation that had suggested an increase in fuel prices and the deregulation of diesel.