Two days before an empowered group of ministers meet to consider a rise in diesel prices, the Indian basket of crude has slipped to an 11-week low of $105.45 per barrel.
Import parity price of petroleum products that are used to determine the desired selling price for domestic companies have also seen a cut in excess of 10 per cent in the past 3-4 days.
The petroleum ministry, however, sees this dip as temporary and looks to make a case for price rise of diesel that accounts for over 60 per cent of the under-recoveries (revenue loss) that the oil marketing companies incur.
From touching a 34-month high of $121.90 per barrel on April 28, the Indian basket of crude has slipped over 13 per cent to $105.45.
"Diesel price was increased by Rs 2 per litre in June last year when crude oil was at $75 per barrel.
"Even if it has slipped to $105, it is still 40 per cent higher than last year June's price.
"Moreover, the recent dip in prices can only be temporary," said a senior oil ministry official.
Finance Minister Pranab Mukherjee-headed group on fuel would meet on May 11 to review diesel prices and discuss ways to cut down the heavy losses of oil marketing companies -- Indian Oil, Hindustan Petroleum and Bharat Petroleum.
Following the meeting, there could be a diesel price increase by around Rs 2 per litre after a gap of nearly 11
Currently, these companies incur a loss of Rs 16.17 on every litre of diesel, Rs 28.28 on every litre of kerosene and Rs 330 for every LPG cylinder.
Diesel price has not been raised since June 26 last year.
At these rates, the OMCs could end up the current financial year with an all-time high loss of Rs 180,000 crore (Rs 1,800 billion).
However, as these losses are based on the import parity prices for the fortnight ended April 28, the amount would be lower when new data is prepared based on current fortnight.
The OMCs purchase crude oil at market rates, are required to sell diesel, kerosene and liquefied petroleum gas at government-subsidised prices, resulting in losses.
In addition to the above three products whose prices are controlled by the government, the companies also lose Rs 8.50 on every litre of petrol.
Though petrol price stands decontrolled since June last year, companies did not raise price after mid-January and saw their losses widen.
