Diesel at almost market price as under-recovery falls to 8 paise

A day after the latest monthly hike in diesel rates, the under-recovery, or revenue loss, applicable on the fuel for the first fortnight effective Sep 1 has almost been wiped out, the government announced Monday, fuelling expectations of imminent market-pricing.

"The under-recovery on High Speed Diesel (HSD) applicable for the first fortnight of September effective 01.09.2014 will go down to Rs.0.08 per litre," the petroleum ministry said here in a release.

This compares with the losses on selling diesel below cost at Rs.1.78 per litre during the second fortnight of August 2014.

State-run oil marketers raised diesel price by 50 paise a litre effective Sunday, in line with the government's January 2013 decision to allow oil marketing companies (OMCs) to monthly raise diesel rates in small doses towards wiping out losses.

"In the case of PDS kerosene and domestic LPG (cooking gas), the under-recoveries for the first fortnight of September 2014 will be Rs.32.67 per litre (Rs.32.98 per litre in last fortnight) and Rs.427.82 per cylinder (Rs.447.87 per cylinder in last fortnight), respectively," the ministry said.

The lowering of under-recoveries has been made possible by the softening international oil rates and the monthly price increases.

Rates have cumulatively risen by Rs 11.74 per litre in 19 instalments since January 2013.

With international crude oil prices dropping below the $100 a barrel-mark last month, petrol rates were cut thrice during the month resulting in a price difference with diesel that has fallen below Rs.10 a litre.

"Oil marketing companies, effective Sep 1, 2014, are now incurring combined daily under-recovery of about Rs.195 crore on the sale of diesel, PDS kerosene and domestic LPG. This is lower than Rs.230 crore daily under-recoveries during the previous fortnight," the statement said.

"The under-recoveries for the financial year 2014-15 are projected to be Rs.91,665 crore while the figure was Rs.1,39,869 crore in 2013-14," it added.

The international crude oil price of the Indian Basket on the previous trading day Friday was $100.97 per barrel.