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Diesel may go costlier by Rs 3/litre


The government plans to hike diesel prices by up to Rs 3 a litre soon after the Assembly elections in five states are over next week, while an equivalent steep increase in petrol rates is also on card.

"An Empowered Group of Ministers (EGoM) headed by Finance Minister Pranab Mukherjee is scheduled to meet on May 11 to mull on a hike in diesel prices," a top government official, refusing to be named, said.

A Rs 3-4 a litre hike in the price of petrol, which had been freed from government control last June, is also on the cards immediately after polling in the last phase of Assembly elections is completed on May 10.

"Petroleum Ministry officials yesterday discussed with the Election Commission the issue of raising prices before Assembly election results are announced on May 13. The Election Commission is believed to have cleared the move," he said. Officially on the EGoM's agenda is ways of mitigating the over Rs 180,000 crore revenue loss state-owned oil firms have projected in 2011-12 on selling diesel, domestic LPG and kerosene at current rates.

An increase in domestic LPG prices may also be discussed at the EGoM meeting that will decide on how the oil firms will be compensated for their losses, he said.

State-owned Indian Oil, Bharat Petroleum and Hindustan Petroleum currently lose Rs 16.17 a litre on diesel and after adding local sales tax or VAT, the desired increase to make rates at par with international prices is Rs 18.19 a litre.

The companies have not even raised price of petrol, a commodity which was freed from government control in June last year, in view of Assembly elections in five states like West Bengal and Kerala.

The hike need to take petrol prices to international parity is about Rs 8.50 per litre, but the entire burden will not be passed on to consumers in one go. "Oil companies will be asked to stagger the hike over a couple of months," the official said.

Besides petrol and diesel, the three state oil firms lose Rs 29.69 a litre on kerosene and Rs 329.73 per 14.2 kg domestic LPG cylinder

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