Almost a month after the central government announced a policy of phased decontrol in diesel prices, state-run Indian Oil Corporation announced an increase in both petrol and diesel prices with effect from midnight.
Diesel is to rise by 45p a litre, while petrol prices would be up Rs 1.5 a litre, both excluding value added tax. On January 18, the company had brought down petrol by 25p a litre and raised diesel by 45p a litre.
"Since the last price change, international oil prices have constantly shown an uptrend. Crude oil has increased from $109.08 a barrel to $113.24, while international petrol prices have increased from $119.59 a barrel to $128.57," an IOC statement said.
However, the rupee-dollar exchange rate improved from Rs 54.78 to Rs 53.43 a dollar during the period. In any case, Hindustan Petroleum Corporation and Bharat Petroleum are likely to do the same thing shortly.
Early this week, IOC chairman R S Butola had indicated a review on pricing of petrol and diesel today. The company said it had been forced to pass on the increase in petrol prices to consumers as it had already suffered losses.
Following the January 17 decontrol and its raising the price, the under-recovery on retail sale of diesel was brought down from Rs 9.60 to Rs 9.15 a litre. However, due to an uptrend in international prices during the period, the under-recovery had gone up to Rs 10.72 a litre, which would come down to Rs 10.27 a litre after today's rise.
The three oil marketing companies were also suffering under-recovery on sale of subsidised kerosene, at Rs 31.60 a litre and domestic cooking gas at Rs 481 a cylinder. The projected under-recovery of IOC on these three products is expected to cross Rs 86,000 crore and of the industry to Rs 163,000 crore during this financial year. Petroleum minister M Veerappa Moily had said diesel prices would be allowed to be raised by 45-50 paise every month, to wipe out the entire loss.