The latest increase in the price of diesel will put an additional burden of Rs 720 crore (Rs 7.2 billion) annually on the Indian Railways, even as it tries hard to bring down expenses to maintain weakening financial viability.
The railways buy an average of 2.4 billion litres of diesel every year spending around Rs 4,500 crore (Rs 45 billion) annually on diesel fuel expenses for operating locomotives.
The government had raised diesel prices by Rs 3 a litre to Rs 41.13 on Saturday.
"The decision to increase diesel price by Rs 3 will have an impact of Rs 720 crore annually on Indian Railways' expenditure.
It has become difficult to keep afloat (economically)," said a senior ministry official.
The government had last raised diesel prices by Rs 2 a litre on June 26, 2010. The rise had resulted in a hit of Rs 460 crore (Rs 4.6 billion)