NEW DELHI: The revenue loss on the sale of subsidised diesel shrunk to a record low of 8 paise a litre on Monday, paving way for the government to deregulate pump prices of the fuel soon.

Petroleum and natural gas minister Dharmendra Pradhan and petroleum secretary Saurav Chandra on Monday appraised finance minister Arun Jaitley of the various revenue and expenditure-related issues.
It is understood that they also discussed diesel price deregulation, officials said. “The petroleum ministry is prepared with necessary data and documentations to formally move a deregulation proposal to the Cabinet. It can also be done by raising its price by 8 paise from tomorrow, which will align pump prices of diesel with market rates,” one official said requesting anonymity.

Pump prices of diesel came almost on a par with market rates after the monthly price increase of 50 paise last week. ET first reported it on Saturday. The Cabinet of the previous UPA government had in January last year allowed state-run retailers to raise diesel rates in small doses of 50 paise every month until pump prices were aligned with international rates.

Since then, prices have risen 24%. Diesel is currently sold at Rs 58.40 per litre in Delhi.

The decision on diesel price deregulation will be taken by the Cabinet later next month, officials said. “The timing for deregulation will be decided by the finance minister after considering the politico-economic situation,” an official said.

But oil ministry officials said the government would not lose this golden opportunity to remove diesel subsidy, which is almost half of the total fuel subsidy bill. Finance Minister Arun Jaitley had also told Parliament last month that the government was keen on fuel price reforms.

“If there are no international shocks in the oil sector, it is expected that in a year, the government will be able to decontrol diesel fully,” he had said. Senior government officials said that with assembly elections round the corner, diesel deregulation is also a political issue and a decision will be taken only after Prime Minister Narendra Modi returns to India.

The government is cautious about freeing diesel from its control because of upcoming assembly elections in Maharashtra, Bihar, Jharkhand and Orissa. Oil marketing firms say if the trend continues, diesel price would be at par with international rates by next week and it is possible the fuel price would come down next month.