New Delhi, Aug. 21: State-owned oil firms are pressuring the government to hike diesel prices following a sharp slide in the rupee, which threatens to widen their revenue losses.
PSU oil firms are seeking the oil ministry’s approval to raise diesel prices by Rs 2-3 per litre because a hike of 40-50 paise per month will not be effective in narrowing the gap.
“We are now losing about Rs 11 per litre on diesel against Rs 10.22 (in the previous fortnight),” a senior official of Indian Oil Corporation said.
In January, the government had decided to raise diesel prices in small doses of 40-50 paise a litre every month to gradually bring it on a par with market rates.
This mechanism brought down the losses to just Rs 2.62 in March from Rs 8.64 per litre.
There are indications that the oil ministry may raise prices after the monsoon session of Parliament, slated to end on August 30.
“The government is wary of any sharp increase in diesel prices with the general elections less than a year away. The issue will be considered at the highest level in the government and its fallout will be considered before a go-ahead is given,” oil ministry official said.
A hike will directly impact prices at a time retail inflation is hovering at 13 per cent.
Rating agency Moody’s has said the falling rupee will inflate the fuel subsidy bill, weaken the credit quality of oil firms and put pressure on the fiscal deficit.