Reliance Industries Ltd, controlled by India's richest man, has started selling diesel to the state railways for the first time since 2005/06 after pricing of the fuel was freed, a company source said on Wednesday. Indian Railways, the country's biggest diesel guzzler, consumes up to 2.5 million tonnes of the fuel each year.

Until last year, it received supplies from state refiners who used to be compensated for selling fuel at below-market rates.

The government freed diesel pricing last October, providing a level playing field to private companies like Reliance and Essar Oil.

The Reliance source, who was not authorised to speak on the record, said the company has been selling a "small quantity" of diesel to the railways. It was not immediately clear how much it sold in 2005/06.