In a surprise move ahead of elections, petroleum minister M Veerappa Moily on Wednesday announced that diesel prices in the country will be de-regulated in the next six months.
“In six months, diesel prices will be deregulated,” Moily said.
The announcement implies a steep `2-per-litre price hike every month, but Moily quickly added that the government would continue with its ongoing policy of raising diesel prices by 50 paise every month. At that rate, it would take 19 months to wipe out losses of oil companies in selling fuel below cost price.
Moily just said “there are ways to do it,” adding that if the rupee appreciates against the dollar and global crude oil prices drop, diesel will be completely de-regulated.
Energy experts felt that the announcement was timed to coincide with ongoing international road shows (US, UK, Hong Kong and Singapore) for a 10% sale of the government’s equity in Indian Oil Corporation (IOC).
A stake sale in IOC is crucial for meeting government’s disinvestment target. However, most investors have raised concerns over the IOC’s losses on account of selling fuels below cost.