After a spike, losses on sale of diesel have fallen by nearly a rupee to Rs 2.49 per litre as international oil rates have moderated.
The difference between the cost of diesel production and the retail selling price had more than doubled to Rs 3.40 a litre in the first half of July as violence in Iraq spooked international oil markets.
The losses have now moderated to Rs 2.49, an official statement said here.
The Narendra Modi government has continued with the previous UPA regime's decision to eliminate subsidy through small doses of monthly price increases. Diesel rates were last hiked by 50 paise a litre on July 1.
Diesel prices have cumulatively risen by Rs 10.68 a litre in 17 instalments since January 2013 when the UPA 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 have fallen rapidly since March as the prospects of a stable and decisive government under Modi helped the rupee gain against the US 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. If the monthly price hikes continue, diesel prices too will be deregulated in five months.
The decline in international rates and rupee marginally appreciating against US dollar resulted in price of diesel sold to bulk users like state road transport corporations, railways and defence, being cut by Rs 1.09 a litre yesterday.
The government had in January 2013 decided to price diesel sold to bulk users at market rates. Subsidised fuel sold at petrol pumps was meant only for individual automobile users like cars, trucks and tractors.
Consequently, the price of bulk diesel in Delhi was cut from Rs 60.41 a litre to Rs 59.32 per litre. Subsided diesel at petrol pumps costs Rs 57.84 per litre currently.
Besides diesel, oil firms at present lose Rs 33.07 a litre on kerosene sold through the public distribution system (PDS) and Rs 449.17 on LPG, the statement said.
"Oil marketing companies are now incurring combined daily under-recovery (revenue loss) of about Rs 261 crore on the sale of diesel, PDS kerosene and domestic LPG. This is lower than Rs 271 crore daily under-recoveries during the previous fortnight," it said.
The under-recoveries for 2014-15 are projected to be Rs 91,665 crore compared with Rs 1,39,869 crore in 2013-14.