Oil Ministry hints at deregulation of diesel rates

Getting good signals from the international market, says Dharmendra Pradhan

Petroleum Minister Dharmendra Pradhan on Tuesday said there were good signals from the international market and his ministry will approach an appropriate forum for freeing of diesel rates.

Underrecovery, or the gap between the retail selling price and the cost of import, this month dipped to an all-time low of eight paise a litre, helped by monthly increases and a softening in international petroleum rates.

"We are getting good signals from the international market. Nothing conclusive as yet though," Pradhan said on the sidelines of a Bureau of Energy Efficiency event here.

The NDA government has continued with the previous UPA regime policy of raising diesel rates by up to 50 paisa a litre every month to bridge the gap between cost and retail prices.

He said the oil marketing companies review prices of diesel every month and will continue to follow the January 2013 policy fo monthly increase.

On being asked as to when the ministry will approach Cabinet for diesel price deregulation, he said: "Whatever is the procedure we will follow it."

Pradhan said appropriate procedure and forum will be approached at appropriate time for deregulation of diesel.

Originally, petrol and diesel prices were deregulated in April 2002 when NDA government was in power. But administered pricing regime made a backdoor entry toward the end of NDA regime in first quarter of 2004.

Congress-led UPA controlled rates as interntional oil prices went through the roof. In June 2010 however it freed petrol price from its control and rates have since them moved more or less in tandem with cost.

In January 2013, the UPA decided to deregulate diesel prices in stages through monthly 50 paisa a litre increases. Rates were last raised on August 31 after which losses had dipped.

Rates have cumulatively risen by Rs 11.81 per litre in 19 instalments since January 2013.

Oil Ministry officials said once the under-recovery is eliminated, a proposal would be put to the Cabinet Committee on Political Affairs for deregulation of diesel prices as was done for petrol.

Deregulation would empower state-owned oil firms to change rates in tandem with cost like they do for petrol.