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Rediff.com  » Business » Losses on sale of diesel rise to Rs 1.78/litre

Losses on sale of diesel rise to Rs 1.78/litre

August 19, 2014 17:38 IST

DieselAfter dipping to the all-time low, losses on sale of diesel have risen to Rs 1.78 per litre, delaying the prospect of deregulation of the nation's most consumed fuel.

Losses or the gap between retail selling price and the cost of import, had dipped to the all-time low of Rs 1.33 a litre in first half of August, bringing the prospect of diesel decontrol within sniffing distance.

An official statement said the loss has now widened to Rs 1.78 per litre based on average international oil price and foreign exchange rate in the first half of the month.

Diesel prices are raised every month by up to 50 paise per litre to trim the losses. Rates were last raised on August 1 after which losses had dipped to Rs 1.33.

Rates have cumulatively risen by Rs 11.24 per litre in 18 instalments since January 2013 when the previous United Progressive Alliance government had decided on small monthly hikes.

The government had in January 2013 decided to raise diesel prices in small doses of 40-50 paise per litre every month till the losses, which are made good through government subsidy, are completely eliminated.

Officials said the monthly increases had trimmed losses to less than Rs 3 per litre in May last year before a fall in rupee value led to losses on diesel sale widening to Rs 14.50 per litre in September 2013.

Since then, monthly increases have continued and the rupee has strengthened.

Losses have fallen rapidly since March as the prospect of a stable and decisive government under Prime Minister Narendra Modi helped the rupee gain against the dollar.

Losses on diesel stood at Rs 8.37 per litre in March.

When Modi government came to power in May, losses on diesel sales stood at Rs 4.41 a litre.

They fell to Rs 1.62 a litre in the second half of June but doubled to Rs 3.40 in first fortnight of July.

The losses fell to Rs 2.49 in second half of last month.

Petrol price was deregulated in June 2010 and has moved more or less in tandem with the cost.

State-owned oil firms calculate the desired retail selling price of petrol and diesel on 1st and 16th of month, based on average international oil rates and foreign exchange value in the previous fortnight.

While petrol rates are revised accordingly, diesel prices are hiked on the 1st of every month.

Besides diesel, the oil firms are losing Rs 32.98 a litre on kerosene and Rs 447.87 on LPG, the statement said.

"Oil Marketing Companies are now incurring combined daily under-recovery (revenue loss) of about Rs 230 crore on the sale of diesel, PDS kerosene and domestic LPG. This is higher than Rs 226 crore (Rs 2.26 billion) daily under-recoveries during previous fortnight," it said.

The under-recoveries for the financial year 2014-15 are projected to be Rs 91,665 crore (Rs 916.65 billion) as opposed to Rs 1,39,869 crore (Rs 1,398.69 billion) in 2013-14.

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