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Diesel prices will rise but not in concert

Last updated on: February 14, 2013 10:45 IST

Diesel prices will rise but not in concert

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Shine Jacob in New Delhi

On January 17, the government allowed Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation to eliminate the loss on sale of diesel to bulk consumers at one go and do a gradual rise in prices at monthly intervals for retail outlets - the government had suggested a 45-50p/litre rise at a time. A month gets over this Sunday, since the decision.

However, increasing prices together might, explain the OMCs, draw the adverse attention of the Competition Commission of India, the legal watchdog in these matters, which has been flexing its muscles.

"If all the companies do it together on one day, it would be a kind of cartelisation. The pricing committee of our company would decide on when and how to go about it once we complete a month on February 17," said a senior executive from HPC.

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Image: A driver waits to fill up his tank with diesel at a petrol station in Kolkata.
Photographs: Rupak De Chowdhuri/Reuters

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IOC plans to review the price later this week. "We are following a fortnightly approach for the diesel price. Since the previous hike was reviewed on January 16, we will be reviewing it on 15th or 16th of this month," said R S Butola, chairman and managing director.

In 2010, Reliance Industries had petitioned CCI, alleging the government OMCs acted as a cartel while pricing their aviation turbine fuel supply for Air India, on a tender floated by the National Aviation Company of India. This came on the heels of petrol price decontrol, when speculation was high that the companies would act like a cartel in the new regime.

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Image: A pump attendant fills cars at a petrol station in Moscow.
Photographs: Maxim Shemetov/Reuters
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"It was this RIL move that will force the companies to go for a hike separately, on different days, when the second tranche of phase-wise decontrol comes after the 15th of this month," said Ajay Bansal, general secretary of the Federation of All-India Petroleum Traders.

On January 17, the OMCs had raised diesel by 45p a litre, along with introduction of a dual pricing system for bulk and retail customers.

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Image: A petrol station in Burbank, California.
Photographs: Fred Prouser/Reuters

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The decontrol decision is meant to help the government check its rising subsidy bill. The estimated reduction, through the rise in price, on diesel under-recovery is around Rs 2,700 crore (Rs 27 billion) during the current financial year. Overall under-recovery projected during this financial year is Rs 160,000 crore (Rs 1.6 trillion).

Since petrol prices were decontrolled in June 2010, the country has seen a 32 per cent rise in its prices, with 27 revisions.


Image: A petrol station in Los Angeles,California.
Photographs: Fred Prouser/Reuters
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