Diesel Prices to be Deregulated in India

The Indian government has declared that diesel prices would be deregulated throughout the country in the next 6 months. This decision is no less than a shock as elections are coming up and it has left numerous people completely perplexed and astounded. Logically, it is indicating towards a hike of at least Rs. 10 by mid 2014. M. Veerappa Moily, Petroleum and Natural Gas Minister, while addressing media at the KPMG Energy Conclave, New Delhi, stated that this hiking in diesel prices would be accomplished by regular monthly price hikes.

Mr. Moily further added by saying, “Under-recoveries (losses on diesel sales) had come down to Rs 2.50 because of monthly increases but they soared to Rs 14 as the Rupee depreciated sharply. Currently, under-recoveries on diesel are at about Rs 9.28 per litre.” This rise in price would certainly affect the fate of diesel cars in India and people's mentality regarding the purchase of diesel vehicles.

It is commonly known that majority of the sales are in total command of state-owned fuel retailers who have to sell the fuels at the Government fixed rates. The rates fixed by the government doesn't satisfy the retailers as they are way less than the costing involved in the production. Hence, government has allowed the retailers in January 2013 to increase the diesel prices by 50 paise per month with a vision that it would rectify things for both public as well as retailers. But it could have consumed up to 18 months to bring situation under control. Although, the whole nation including the minister is quite optimistic and confident that Rupee will gain against the US Dollar and crude oil prices will fall down and subsequently it would result in shortening this period.