The decision to raise diesel price came late Thursday night and is applicable from midnight Jan 17, 2013.
The oil marketing companies (OMCs) were able to hike the price of the transport sensitive fuel after the Cabinet Committee on Political Affairs (CCPA) at a meeting presided over by Prime Minister Manmohan Singh Thursday gave the nod for a partial deregulation of the fuel.
In the national capital, diesel price stood at Rs.47.65 per litre from Rs.47.15 per litre a day ago. In Mumbai, the price stood at Rs.53.71, in Kolkata at Rs.51.51 and in Chennai at Rs.50.68 per litre respectively.
Meanwhile, petrol price in New Delhi, stood at Rs.67.26 per litre, in Mumbai, the price was Rs.74.00, in Kolkata Rs.74.72 and in Chennai at Rs.70.26 per litre.
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Petroleum and Natural Gas Minister Veerappa Moily Thursday said the cabinet in a meeting decided to allow the OMCs to fix their own diesel prices. The move is expected to lessen the government's subsidies bill and rein in the fiscal deficit.
According to ministry officials, OMCs could revise prices by an amount less than Rs.1 per litre at one go.
The move comes nearly three years after petrol prices were similarly freed in June 2010.
Ministry officials said the move to deregulate diesel prices was necessitated by the fact that oil marketing companies had accumulated losses of Rs.52,711 crore from April-September, 2012 (Rs.9.60 per litre in the present scenario by selling diesel at below cost).
The OMCs had incurred under-recoveries of about Rs.81,192 crore for the 2011-12 and Rs.34,706 crore in 2010-11.
Diesel prices were last hiked in September 2012, when it was increased by Rs.5.63 a litre, the sharpest ever rise.
The hike in diesel prices is expected to affect a wide gamut of transportation ranging from locomotives to heavy duty trucks.
Meanwhile the scrips of the three OMCs -- Indian Oil, Bharat Petroleum and Hindustan Petroleum -- rallied at the Bombay Stock Exchange (BSE).
Indian Oil scrip grew by 11.11 percent in intra-day trade at Rs.351.00, while that of Bharat Petroleum increased by 9.56 percent at Rs.433.75 and Hindustan Petroleum, up 8.81 percent at Rs.376.05.