Diesel price to go up by 40-50 paisa per month

The government today announced a partial deregulation of the diesel prices. The oil companies can now decide the diesel prices. Its a partial deregulation in the sense that a small hike in price has been permitted over a period of time. The oil marketing companies will now have periodical hike in diesel prices till government subsidy currently at the Rs. 9.60 per litre is completely removed. The diesel prices are expected to be raised from 50 paise to 1 rupee tomorrow. This will be followed by hikes of 40-50 paise per litre excluding local levies like VAT every month. The price of diesel will now increase by Rs 6 in a year. The new price would be effective from Friday.

The government clarified that diesel prices are not being de-regulated and that the retailers can make only minor changes. Finance Minister P Chidamabaram said the oil companies had been "given freedom to make small price corrections."

Price of diesel was last revised on September 14 when it was hiked by a steep Rs. 5.63 per litre. At present, diesel costs Rs 47.15 per litre in Delhi.

Meanwhile petrol price will go down by 25 paise per litre in view of softening in cost of raw material.

The periodic hike in diesel prices would have an alround spiralling effect on commodity prices and transportation cost and the will have a cascading effect on inflation..