With escalating violence in Iraq spooking international oil markets, losses on the sale of diesel have more than doubled to Rs 3.40 a litre even after monthly price increases.
The difference between the cost of diesel production and the retail selling price has widened to Rs 3.40 a litre now after narrowing to Rs 1.62 a litre last month, according to an official statement.
The losses doubled even after the Narendra Modi government continued with the previous United Progressive Alliance regime's decision to eliminate subsidy through small doses of monthly price increases.
Diesel rates were hiked by 50 paise a litre on Monday.
Diesel prices have cumulatively risen by Rs 10.68 a litre in 17 instalments since January 2013 when the United Progressive Alliance government had decided on the monthly hikes.
When the Modi government came to power in May, losses on diesel sales stood at Rs 4.41 a litre.
They narrowed to Rs 2.80 in the first half of June and then to Rs 1.62 in the second fortnight.
The losses had fallen rapidly since March as the prospects of a stable and decisive government under Modi helped the rupee gain against the dollar.
Losses on diesel stood at Rs 8.37 per litre in March.
Petrol prices were deregulated in June 2010 and have moved more or less in tandem with costs.
Besides diesel, oil firms at present lose Rs 33.07 a litre on kerosene sold through the public distribution system and Rs 449.17 on LPG, the statement said.
"Oil marketing companies are now incurring combined daily under-recovery (revenue loss) of about Rs 271 crore (Rs 2.71 billion) on the sale of diesel, PDS kerosene and domestic liquefied petroleum gas.
This is greater than Rs 249 crore (Rs 2.49 billion) daily under-recoveries during the previous fortnight," it said.
The under-recoveries for 2014-15 are projected to be Rs 91,665 crore (Rs 916.65 billion compared with Rs 1,39,869 crore (Rs 1,398.69 billion) in 2013-14.