Firms may be allowed to reduce diesel prices

Following criticism from both its Left allies and the Opposition, the government is likely to allow oil marketing companies to reduce the diesel prices tomorrow. Officials said the reduction could be in the range of 50 paise to Re 1 a litre.

There is also a scope of reduction in the retail price of petrol by Rs 1.25 to Rs 2 a litre though oil companies may not go for the cut for past under-recoveries.

The oil marketing companies had skipped price revision on November 30, which was the last scheduled date for doing so. Petrol prices could have been slashed by Rs 0.49 a litre then and diesel prices by Rs 0.05 per litre in line with the November 4 government policy statement of 100 per cent import parity for petrol and 50 per cent parity for diesel.

The government, currently taking a fresh look at the fortnightly price revision policy for petroleum products, is also likely to opt for a quarterly review of retail prices during times when changes are not extreme.

Speaking to reporters on the sidelines of a programme on gas conservation, Petroleum Minister Mani Shankar Aiyar said international prices have fallen but "we will have to wait and see how the markets react to the Organisation of Petroleum Exporting Countries' announcement of cut in output".

International oil prices have fallen but they are still rallying at a very high level, he said. When asked whether the retail prices of petrol and diesel would be reduced in line with the international prices, he said.

"They were not raised in line with the increase in international prices." Referring to the previous Petroleum Minister Ram Naik, he said the minister in the earlier government had put petroleum prices on hold.

The government had introduced the system of fortnightly revision of prices in April, 2002, following dismantling of the administered pricing mechanism for petrol and diesel.

Aiyar said it was a mistake that normal international market conditions were taken into consideration at that time.

"We want normal conditions. But for that international market should be in normal condition," he said.