New Delhi: A Rs 3.56 per litre cut in diesel prices is in the offing as slump in international oil prices have helped nearly doubling of profit on India's most consumed fuel.
With crude prices dipping to four-year low, the over-recovery or profit on diesel sales, which was Rs 1.90 a litre in first half of October, has now climbed to Rs 3.56 per litre, an official statement said.
State-owned fuel retailers made their maiden profit on diesel in second half of September with a modest over-recovery of 35 paise. This swelled to Rs 1.90 in first half of October and stands at Rs 3.56 per litre now.
Over-recovery or profit should have in natural course translated into a price reduction to bring retail selling price at par with cost. But rates have not been cut due to election code being in force for the assembly polls.
The model code of conduct will be lifted with the announcement of results of elections to Maharasthra and Haryana assembly on Sunday.
Sources said since reduction in rates of a commodity controlled by the government could have been seen as a move to lure voters, the Election Commission did not give permission to reduce rates.
Petrol, on the other hand, is a deregulated commodity where oil companies enjoy pricing freedom. As a consequence, oil companies have cut rates half a dozen times during recent months in step with international trend. Rates were last cut by Re 1 a litre yesterday.
Benchmark Brent crude oil declined as much as USD 1.06, or 1.3 per cent, to USD 82.72 a barrel in the London markets, the lowest since November 2010.
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 became Rs 1.90 a litre on October 1 and Rs 3.56 now. But under-recoveries continue on kerosene and LPG.
"In the case of PDS Kerosene and Domestic LPG, the under-recoveries for the 2nd fortnight of October 2014 will be Rs 31.22 per litre (Rs 32.67 per litre in last month) and Rs 404.64 per cylinder (Rs 427.82 per cylinder in last month), respectively," the statement said.
State-owned fuel retailers - IOC, BPCL and HPCL are losing about Rs 139 crore a day on sale of PDS kerosene and domestic LPG. This is lower than Rs 156 crore daily under-recoveries during previous fortnight, it said.
Oil firms revise rates of petrol and diesel on 1st and 16th of every month based on average international oil rates and foreign exchange rates in the preceding fortnight. The same in case of LPG and kerosene is done once a month.