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Diesel prices to come down soon, oil companies recover losses

By FnF Correspondent | PUBLISHED: 16, Sep 2014, 21:17 pm IST | UPDATED: 16, Sep 2014, 21:20 pm IST

Diesel prices to come down soon, oil companies recover losses New Delhi: The expectations of a cut in diesel prices rose today after the oil ministry said the losses on the fuel has been wiped out and there is over-recovery of Rs. 0.35 per litre with effect from September, 16 2014.

This is perhaps the first time that retail prices in India are higher than the global rates. A Press Trust of India report citing sources said deregulation or freeing of diesel would be discussed after Oil Minister Dharmendra Pradhan's return from his Vietnam tour. Deregulation would empower state-owned oil firms to change rates in tandem with cost like they do for petrol.

Global crude prices have fallen sharply to over two-year lows to around $97 per barrel. This together with monthly price increases of up to 50 paise a litre helped oil marketing companies wipe out their losses in selling the fuel.

The next revision in diesel prices is due this month-end. If the diesel prices are cut, it would be the first downward revision in over five years.

The Narendra Modi government has continued with the previous UPA regime's policy of raising diesel rates by up to 50 paise a litre every month to bridge the gap between cost and retail prices. In January 2013, the UPA decided to deregulate diesel prices in stages through monthly 50 paise a litre increases.

In June 2010, the government had freed petrol from its control and rates have since then moved more or less in tandem with cost. The price of diesel has cumulatively risen by Rs. 11.81 per litre in 19 instalments since January 2013. Diesel prices were last raised on August 31.

The government must take advantage of the lowest oil prices in a year to deregulate diesel, Reserve Bank of India Governor Raghuram Rajan said on Monday.

"Lower crude oil prices are helping consuming countries like us. Typically a lower oil price means a lower CAD (current account deficit), lower oil subsidies and lower inflation. We need to seize this moment to eliminate diesel subsidies completely. We should take this moment to eliminate diesel subsidies as soon as possible," Mr Rajan told a banking summit in Mumbai.
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