Diesel prices are way below the price of petrol for a long time now, with the difference of about Rs. 24 in Delhi (petrol costs Rs. 66). The reason: the government controls the retail price of diesel. Even if the oil marketing companies (HPCL, BPCL and IOC) lose money on selling diesel, that's the rate they need to sell at.
But this has created many problems. For one, our oil "under-recovery bill" is out of control. With Brent crude at $125 per barrel and the rupee-dollar equation at Rs. 50, the input price of our fuel basket is above Rs. 6,000, among the highest ever. Prices of diesel haven't been revised up since Jun 2011, when the price of crude was $108, and the rupee was around Rs. 45 to a dollar. Since then, crude has gone up 15% while the rupee has fallen about 10%, which is a near 25% increase in cost.
This difference is currently sitting as a loss on the books of the Oil Marketing Companies (OMCs) who hope, fervently, that the government will reduce it, by first transferringRead More »from Diesel Prices Must Be Deregulated In the Budget