Oil Companies reduces petrol prices by 25 paise, diesel goes up by 55 paise

Friday 18 January 2013, 16:41 PM by

The Oil Marketing Companies (OMC) in India have come up with a news, which comes as a relief for the petrol vehicle owners and a sign of worry for diesel vehicle owners. It has implied a hike in the diesel prices by 55 paise, whereas granted a relief of 25 paise on the petrol. On this move, industry experts believe that the Indian economy will witness an adverse impact on inflation. It is also expected that the fares of public road transportation and railways will be increased, owing the diesel price hike. It must be noted that the petrol prices were increased by 35 paise off-late, before the announcement of its reduction that went on air on January 17.

The statement has been rolled out after the Cabinet decided to deregulate the diesel prices and reduce the price gap between petrol and diesel fuels. Reportedly, the government is planning to completely remove the subsidy from diesel fuel over a period of time, which will help it to reduce the subsidy bill. With the change in fuel prices in the National Capital Region (NCR), petrol now costs Rs. 67.46 per litre, whereas diesel is sold for Rs. 47.60 per litre.

On the part of bulk or direct customers, including Defence, Railways, State Transport, Mines and Cement as well as Power Plants, among others, the OMCs are expected to impose an increase in diesel prices by Rs. 11 per litre. This move will surely lead to a significant increase in the public transport fares. After the Petroleum and Natural Gas Ministry generated a notification on January 17’s late evening, OMCs decided to initially increase the diesel prices by 55 paise. Industry experts believe that the OMCs will hike the diesel prices by around 50 to 60 paise every month, till the subsidy on this fuel is eliminated completely.

Reportedly, the direct or bulk customers account for almost 18 per cent of the total diesel sale in India. Therefore, in order to eliminate further under recovery on the sale of diesel, the government allowed the OMCs to provide the fuel to direct customers at the market rate, without any subsidy. According to this plan, the sale of diesel to all bulk customers, directly from the OMCs’ installations, at no-subsidised rates will be briefed on 1st and 16th of every month. According to reports, this will result to a reduction of under recovery by Rs. 12,907 crore each year on the diesel.