The steepest ever Rs 5.63 a litre hike in price not withstanding, diesel in India is still cheaper than its neighbours Pakistan and Bangladesh as also the US and the European countries.
Diesel prices were on September 14 raised by Rs 5.63 per litre to Rs 46.95 a litre in Delhi.
Even so, diesel in India costs less than Bangladesh where a litre costs Rs 49.08, and in Pakistan - Rs 59.56. In Nepal, it costs Rs 57.91 per litre, according to a background note prepared by the Ministry of Petroleum and Natural Gas explaining rational for price hike.
In the US, diesel is priced at Rs 54.55 per litre while it costs Rs 77.84 in France, Rs 83.36 in Germany, Rs 99.38 in the UK and Rs 93.11 in Italy.
The first hike in more than 14 months was triggered by a 28 per cent surge in crude oil price and rupee value dropping about 24 per cent against the US dollar -- from Rs 44.85 to a US dollar in July 2011 to Rs 55.58 this month, making imports costlier.
India imports 79 per cent of its oil needs.
The note said oil firms were losing a record Rs 17.05 per litre on selling diesel at retail price of Rs 41.32. At this rate, Indian Oil (IOC), Hindustan Petroleum (HPCL) and Bharat Petroleum (BPCL) were projected to lose Rs 1,17,780 crore in revenue on sale of just diesel in current fiscal.
This was besides Rs 32.70 per litre loss on kerosene and Rs 347 per cylinder deficit on domestic cooking gas (LPG).
The increase in price would help trim the losses on diesel sales by about Rs 15,000 crore during the remaining part of the current fiscal.
"Financial health of oil retailers has been deteriorating over the years. In 2011-12, they reported a combined net profit of mere Rs 6,177 crore, which was only 0.7 per cent of their combined turnover of Rs 8,22,828 crore," the note said.