Mindful of the fallout of the unpopular monthly increase during election season, the ministry yesterday asked state-owned oil refiners not to raise diesel prices by the scheduled 50 paise a litre on the grounds that the loss on sales of the fuel has fallen to less than Rs 6 a litre. (Agencies)
The oil firms has said that there was no need to increase rates because an expert committee headed by Kirit Parikh had suggested that the government should provide a subsidy of Rs 6 a litre on diesel. The matter has been referred to the Election Commission.
However, sources said the government had never accepted the Parikh Committee recommendation and the January 2013 decision of the Cabinet to increase diesel prices in small doses to cut subsidy did not set any limits.
The Cabinet had in January last year decided that diesel prices should be raised by 40-50 paise a litre every month until losses on the fuel are wiped out, they said. However, there was no evidence of the Rs 6 threshold when diesel prices were raised on May 12 and June 1 last year, when the under-recovery or loss on the fuel slipped to Rs 3.81 and Rs 4.87 per litre, respectively.
Sources said the ministry had planned to approach the Cabinet in February to halt further diesel price increases but couldn't do so before last month's announcement of the general elections. There had been demands from within the ruling Congress party to stop the increases, 14 of which had taken place since January 2013 for a cumulative total of Rs 8.33 a litre.
The oil companies skipped raising diesel prices in April, when assembly elections were held in Oil Minister M Veerappa Moily's home state Karnataka. However, they made up by hiking diesel prices by 90 paise in the following month.
Indian Oil Corp, the nation's largest oil firm, said on Tuesday that it had been implementing the government order to "increase the retail selling price of diesel within a small range every month until further orders."
"The under-recovery on diesel is currently Rs 5.93 a litre, which is below Rs 6 per litre, which is the interim subsidy cap recommended by the expert group of Kirit Parikh.
"Hence, the issue of monthly price increase is under consideration of the government and the matter has been referred to the Election Commission. A decision regarding revision of diesel retail price shall therefore be taken on receipt of further advice by the government in this context," it said in a statement.
Mindful of the fallout of the unpopular monthly increase during election season, the ministry yesterday asked state-owned oil refiners not to raise diesel prices by the scheduled 50 paise a litre on the grounds that the loss on sales of the fuel has fallen to less than Rs 6 a litre.