Get ready for larger hikes in diesel prices as Oil Minister M Veerappa Moily on Wednesday said oil marketing companies may be allowed to hike prices of the fuel by more than 50 paise per litre a month.
While petrol price has been deregulated since June 2010 and is market determined, the government still controls the price of diesel and only allows minor revisions.
"That's under consideration, but we have not yet decided," Mr Moily told a news channel when asked whether the government would allow companies to raise retail prices for diesel beyond the 50 paise a month currently allowed.
In January the government allowed fuel retailers to raise prices of subsidised diesel every month and asked bulk buyers to pay market rates.
Diesel prices have been hiked seven times since January 17, cumulatively taking up the price of the fuel by Rs. 3.75 per litre.
But with international oil prices firming and the rupee continuing to slide against the dollar, oil companies have put forth a request with the Oil Ministry to allow higher price hikes.
The rupee hit an all-time record low of 61.80 on August 6 against the dollar and has been the worst performing Asian currency, falling almost 12 per cent in the last three months.
Oil companies buy crude in dollars and a weak rupee affects them adversely.
While an increase in diesel prices may see prices of essential commodities go up, there is little the government can do- caught between a rock and a hard place- as it tries to rein in the widening current account deficit which is one of the major reasons for the rupee's slide.
India's imports grew 6 per cent in the first quarter of the current fiscal against a decline of 5.7 per cent in in the same period last year.
Current account deficit- which occurs when a country's import of goods, services and transfers exceeds the exports of the same-hit a record 4.8 per cent of the gross domestic product or GDP last fiscal.
Crude along with gold makes for two of the biggest components of India's import bill. The government wants to cut back on both of them to ease the current account deficit and help the weak rupee. The government is aiming to cut the oil import bill by $1.5 billion this fiscal. It is also looking for ways to boost oil imports from Iran, which will result in dollar savings.
Source: NDTV Profit
While petrol price has been deregulated since June 2010 and is market determined, the government still controls the price of diesel and only allows minor revisions.
"That's under consideration, but we have not yet decided," Mr Moily told a news channel when asked whether the government would allow companies to raise retail prices for diesel beyond the 50 paise a month currently allowed.
In January the government allowed fuel retailers to raise prices of subsidised diesel every month and asked bulk buyers to pay market rates.
Diesel prices have been hiked seven times since January 17, cumulatively taking up the price of the fuel by Rs. 3.75 per litre.
But with international oil prices firming and the rupee continuing to slide against the dollar, oil companies have put forth a request with the Oil Ministry to allow higher price hikes.
The rupee hit an all-time record low of 61.80 on August 6 against the dollar and has been the worst performing Asian currency, falling almost 12 per cent in the last three months.
Oil companies buy crude in dollars and a weak rupee affects them adversely.
While an increase in diesel prices may see prices of essential commodities go up, there is little the government can do- caught between a rock and a hard place- as it tries to rein in the widening current account deficit which is one of the major reasons for the rupee's slide.
India's imports grew 6 per cent in the first quarter of the current fiscal against a decline of 5.7 per cent in in the same period last year.
Current account deficit- which occurs when a country's import of goods, services and transfers exceeds the exports of the same-hit a record 4.8 per cent of the gross domestic product or GDP last fiscal.
Crude along with gold makes for two of the biggest components of India's import bill. The government wants to cut back on both of them to ease the current account deficit and help the weak rupee. The government is aiming to cut the oil import bill by $1.5 billion this fiscal. It is also looking for ways to boost oil imports from Iran, which will result in dollar savings.
Source: NDTV Profit
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