Diesel prices were on Friday hiked by Rs 1.02 per litre, the fourth increase in rates this year.
State-owned oil firms, which had been mandated in January to raise prices by up to 50 paisa per litre every month till entire losses on the fuel are wiped out, skipped raising rates in April to avoid troubles for the government during the second half of the Budget session of Parliament.
The companies have made up for skipping the April revision by increasing rates by Rs 0.90 per litre, excluding local sales tax or VAT.
The increase comes to Rs 1.02 per litre in Delhi where the fuel will now cost Rs 49.69 a litre compared to Rs 48.67 previously, Indian Oil Corp, the nation's largest fuel retailer, said in a press statement.
In Mumbai, diesel will cost Rs 1.12 more at Rs 56.04 a litre, while in Kolkata it will cost Rs 53.97 per litre from tomorrow as compared to Rs 52.91 at present. In Chennai, the price has been raised by Rs 1.10 to Rs 52.92.
Diesel prices were last hiked on March 23 when rates were raised by 45 paisa, excluding VAT. Similar hikes had taken place in January and February, but prices were not changed in April when Parliament's Budget session was on.
The revision in April may have been avoided, possibly in view of oil minister M Veerappa Moily's home state of Karnataka going to assembly polls. Congress romped back to power in the state.
Before the hike, oil firms were losing Rs 3.81 per litre on diesel and Friday's increase will help cut losses by 90 paisa.
While losses on diesel had declined from Rs 7.34 a litre at the beginning of the fiscal to Rs 3.80 at present, the softening in international oil prices had led to petrol prices being cut by four times - by Rs 3 per litre on May 1, Rs 1.20 on April 16, Re 1 on April 1 and Rs 2.40 on March 16.
IOC said the government had in an order dated January 17 authorised oil firms to "increase the retail selling price of diesel within a small range every month until further order". "Accordingly since then, retail price of diesel have been raised by Rs 0.45 per litre on three occasions - January 18, February 16 and March 23," the statement said.
IOC said it has decided to increase retail selling price of diesel from midnight tonight by "Rs 0.90 per litre (excluding VAT) covering the increase for the months of April and May 2013."
The government had in January authorised state-owned oil firms to hike diesel prices by small doses of up to 50 paisa per litre every month till such time that their losses on the fuel sale are completely wiped out.
Though petrol prices were deregulated in June 2010, they rarely moved in tandem with cost. However, since January, they have more or less moved in step with international prices with oil firms revising rates every fortnight.
Before the hike, it was estimated that oil firms were projected to lose Rs 84,475 crore on diesel and cooking fuel this fiscal.
IOC, Hindustan Petroleum Corp (HPCL) and Bharat Petroleum Corp (BPCL) lost Rs 1,61,029 crore in 2012-13 on sale of diesel, domestic LPG and kerosene at government controlled rates, which are way below market price.
Softening of international oil prices had meant that losses on diesel came down from Rs 7.34 a litre at beginning of the fiscal to Rs 3.81 (before this evening's hike).
The under-recovery on domestic cooking gas (LPG) has come down to Rs 378.38 from Rs 434.50 per 14.2-kg cylinder, while the same on kerosene has been cut to Rs 29.33 a litre from Rs 32.02 earlier.