Profit on diesel sale swells to Rs 1.90/litre

Profit on sale of diesel swelled to Rs 1.90 per litre as oil ministry awaits return of Prime Minister Narendra Modi to cut rates.

With international oil prices continuing to slide, the over-recovery or profit on diesel sales, which was 35 paise in the second half of September, climbed to Rs 1.90 a litre, an official statement said.

Over-recovery or profit should have in natural course translated into a price reduction to bring retail selling price at par with cost. But the oil ministry decided to wait and watch last month.

Now, with the profit rising further, it wants to reduce rates and pass on the benefit to consumers but is unsure of its mandate.

Sources said the ministry is of the opinion that it does not have a clear mandate to reduce rates post the January 2013 decision of the Cabinet to hike prices by 40-50 paise a litre every month.

Diesel prices have not been deregulated or freed yet and so rates cannot be reduced.

Petrol on the other hand, had been deregulated in June 2010 and rates have since then moved every fortnight in tandem with the cost. Petrol rates were on Tuesday cut by 54 paise in line with international trend.

Sources said Oil Minister Dharmendra Pradhan has already written to Modi on the emerging scenario. Also, the ministry has written to the Election Commission seeking their concurrence for the price decrease in view of state assembly elections in Maharashtra and Haryana.

A decision will be taken after Modi's return, they said. Softening international oil rates have meant that diesel under-recovery or the difference between retail price and its imported cost was wiped out and there was an over-recovery of 35 paise a litre from September 16. This over-recovery is now Rs 1.90 a litre.

But under-recoveries continue on kerosene and LPG. "In the case of PDS Kerosene and Domestic LPG, the under-recoveries for the 1st fortnight of October 2014 will be Rs 31.22 per litre (Rs 32.67 per litre in last fortnight) and Rs 404.64 per cylinder (Rs 427.82 per cylinder in last fortnight) respectively," the statement said.

State-owned fuel retailers - IOC, BPCL and HPCL are losing about Rs 156 crore (Rs 1.56 billion) a day on sale of PDS kerosene and domestic LPG. This is lower than Rs 190 crore daily under-recoveries during previous fortnight, it said.

Sources said the Oil Ministry is of the view that while the Cabinet Committee on Political Affairs (CCPA) on January 17, 2013, allowed a monthly increase in diesel price of 40-50 paise per month to wipe out the under-recovery, it wasn't envisaged that there would be over-recovery.

It wants to reduce diesel price to protect state-owned oil companies' market share, which may be lost to private retailers who would be selling diesel in tandem with international prices.