With the rates of the Indian basket of crude oil falling below $95 a barrel, the petroleum ministry Wednesday said losses on diesel sales had been wiped out with the government now looking at a profit of nearly two rupees a litre on the fuel sales.
"The over-recovery on High Speed Diesel (HSD) applicable for the first fortnight of October effective 01.10.2014 is now Rs.1.90 per litre," an official release here said.
"The over-recovery was Rs.0.35 per litre during the second fortnight of September 2014," it added.
The country is on the threshold of market pricing of diesel since under-recoveries, or the difference between retail price and its imported cost, have been wiped out by the monthly hikes in diesel price.
Diesel prices are being raised monthly by 50 paise a litre in line with the government's January 2013 decision, while September was the first month that passed without a hike.
Rates have cumulatively risen by Rs.11.81 per litre in 19 instalments since January 2013.
The under-recovery on High Speed Diesel (HSD) applicable for the first fortnight of September will go down to 8 paise per litre, the petroleum ministry had said on the first of the month.
This is possibly the first time that retail prices in India are higher than global rates.
"Oil marketing companies (OMCs), effective Oct 1, 2014, are now incurring combined daily under-recovery of about Rs.156 crore on the sale of PDS kerosene and domestic LPG. This is lower than Rs.190 crore daily under-recoveries during previous fortnight," the ministry said.
"In the case of PDS kerosene and domestic LPG, the under-recoveries for the first fortnight of October 2014 will be Rs.31.22 per litre (Rs.32.67 per litre in last fortnight) and Rs.404.64 per cylinder (Rs.427.82 per cylinder in last fortnight), respectively," it added.
The under-recoveries for the financial year 2014-15 on the sale of diesel, PDS kerosene and domestic LPG are projected to be Rs.91,665 crore while the figure was Rs.1,39,869 crore in 2013-14.
Lowering crude prices is the result of sluggish demand from major importers like China coupled with a rise in output from otherwise strife-torn Libya, as well as the easing of concerns over supplies from Iraq where various factions are engaged in military combat.
While the government is keen to pass on the benefit of cheaper oil to consumers, it is hesitant to free diesel prices just before assembly elections in four states -- Jammu and Kashmir, Maharashtra, Bihar and Jharkhand, an official source told IANS.
Diesel currently costs Rs.58.97 in Delhi, Rs.67.26 in Mumbai, Rs.63.81 in Kolkata and Rs.62.92 in Chennai.
Petrol prices were cut by 54 paise a litre, exclusive of local taxes, with effect from Wednesday, following three previous rate cuts in August.
Oil companies calculate the desired retail selling price of petrol and diesel on the 1st and 16th of every month based on average international benchmark price and the rupee-dollar exchange rate.
