Diesel prices in India will be hiked by 7-8 US cents per litre every month until the losses from selling the fuel at subsidized rates are completely wiped out, the country's Oil Minister Veerappa Moily said Friday.
"Until further orders, oil marketing companies can increase it diesel price by 40-50 paise (7-8 cents) per litre every month," he said addressing press persons in the Indian Capital.
Diesel is India's most used fuel. Compared to petrol, it is cheaper by 36 cents per litre. While petrol is priced at around USD 1.23 per litre, diesel is available at 87 cents per litre in New Delhi.
While the price of petrol is purely market-determined in India, diesel remains mostly under government control even though oil firms now have the freedom to make minor revisions to the price.
The country's policy to subsidise retail prices of fuels such as diesel, which accounts for about 40 per cent of refined fuel consumption, is a major drain on the country's Budget. State-run refiners currently sell diesel at a loss of around 20 cents per litre.
The decision to raise diesel prices in small doses every month will stand "until further orders", said the Oil Minister but did not say when the oil firms were likely to announce another round of price increase.
India is largely dependent on imports for its fuel needs. In order to minimize its dependency on imports by 2030, the Oil Ministry will set up a committee which is likely to submit a proposal in two months, said the minister.