Diesel price hiked by 45 paise; petrol price cut by 25 paise

Oil marketing companies announced a marginal hike in diesel prices of 45 paise soon after the government partially deregulated diesel price allowing a hike of 40-50 paise a litre per month for retail customers and nearly Rs 11 for bulk consumers.

According to media reports, prices for bulk buyers like defence, railways and state transport undertakings have been raised by Rs 10 per litre.

Shares of oil marketing companies rallied for second consecutive session after the government allowed them to hike diesel prices monthly.

State-owned oil companies in a parallel move also cut the petrol prices by 25 paise per litre in view of softening in cost of raw material.

In a bid to sweeten the bitter pill, the Cabinet Committee on Political Affairs chaired by Prime Minister Manmohan Singh on Thursday raised the cap on subsidised LPG to nine cylinders per household from six, bowing to public pressure.

The decision on diesel is expected to cut the subsidy bill by Rs 12,900 crore on account of hike in price of fuel sold to bulk consumers like Railways and state transport undertakings.

Diesel accounts for 59 per cent of the estimated Rs 160,000 crore fuel subsidy bill in 2012-13.

An order issued by the Oil Ministry post CCPA decision stated that bulk users be charged market price, that will result in a hike of Rs 10.81 per litre over and above the current rate of Rs 47.15 in Delhi. The government is expected to save about Rs 9,000 crore of raise in price for retail buyers.

"We have given some liberty to oil marketing companies to raise diesel prices in small dozes. They are authorised to make small price correction from time to time," Oil Minister M Veerappa Moily said.

"They should exercise this discretion in such a manner that inflation is not impacted. Also, the entire burden is not put on consumers." Asked what small meant, he said "small means small."

Finance Minister P Chidambaram maintained that the oil companies have been allowed to make "small correction from time to time."

"I am not factoring in at this moment (the price rise). I am proceeding on the basis that the subsidy bill remains the same (as earlier)," he said. .

With agency inputs