An Empowered Group of Ministers headed by Mr Pranab Mukherjee finance minister will have to take a call on making prices of diesel fully market determined.

Mr S Sundareshan oil secretary said that "That call (to free diesel prices from government control) will have to be taken by EGoM.” He told reporters that state run Indian Oil Corp, Hindustan Petroleum and Bharat Petroleum currently sell diesel at INR 4.71 per liter discount to its imported cost.

If diesel rates are deregulated that is the amount by which retail prices will go up. The EGoM had on June 25 freed petrol price and had decided to make diesel prices market-determined in due course. Mr Sundareshan said that "Unfortunately, crude prices have been consistently going up since June.”

Asked if the EGoM meet has been scheduled to discuss diesel price deregulation, he said that "That's not what I said. All I said was that a call for the issue will have to be taken by the EGoM. We are not going to EGoM now. I think it is extremely difficult for the government to pass on the entire burden (of moving to free price regime) to the consumers."

Mr Sundareshan said that "We were (in June this year) hoping crude prices would soften and there would be reasonable grounds for passing on a small additional burden to the consumer.’

International crude oil (raw material for making petrol and diesel) prices have risen by over USD 10 per barrel to over USD 85 to USD 86 a barrel since the June decision.

Mr Sundareshan said the deregulation of diesel price will not hit the follow on public offer of IOC slated for January 2011. He said that "I don’t think these issues are related. Reforms are ongoing process... one should remember that IOC's initial public offering happened when petrol and diesel prices were completely regulated (by the government).”

(Sourced from HINDUSTAN TIMES)