Diesel price is likely to be cut by about Re 1 per litre, the first reduction in rates in over five years, while petrol price may be slashed by around 55 paise after Prime Minister Narendra Modi returns from the US.
Though today is the scheduled fortnightly review of petrol and diesel rates, an announcement will be made only after Modi returns from his US trip tomorrow evening.
Softening international oil rates has meant that diesel under-recovery or the difference between retail price and its imported cost was wiped out and there was an over-recovery of 35 paise a litre from September 16. This over-recovery is now about Re 1 a litre.
While the government had resisted the temptation to cut rates then, prices are likely to be reduced this week, industry and government sources said.
Sources said the oil ministry is of the view that while the Cabinet Committee on Political Affairs (CCPA) had on January 17, 2013, allowed a monthly increase in diesel price of 40-50 paise per month to wipe out the under-recovery, it wasn’t envisaged that there would be over-recovery.
It wants to reduce diesel price to protect state-owned oil companies’ market share, which may be lost to private retailers who would be selling diesel in tandem with international prices.
Oil Minister Dharmendra Pradhan is believed to have already written to Modi on the emerging scenario. Also, the ministry has written to the Election Commission seeking their concurrence for the price decrease in view of state assembly elections in Maharashtra and Haryana.
A decision will be taken after Modi’s return, they said.