Under-recovery on sale of diesel drops to 18-months low

Posted By: Religare
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The under-recovery on the sale of diesel has fallen down to Rs 6.5 per liter in the time span of 15 days gone by.

The recorded sales drop has been regarded as the lowest in 18 months, which is largely due to the fall in international prices and partly because of the three monthly price hikes of 0.45 paise per liter.

"If the current global prices hold, then, even if there are no price hikes for the rest of the financial year, under-recoveries will still fall by 20 per cent," analysts at Motilal Oswal Securities said.

The industry analysts have predicted that total under-recoveries are likely to fall to Rs 1.3 lakh crore in the current financial year if the situation wherein, global prices remaining at the same levels, persists.

"Decrease in diesel under-recovery also provides some comfort to the government in the back of impending general elections in 2014," they said. However, analysts expect that diesel reforms comprising implementation of newly-jotted down price hikes may face delays owing to the volatile political situations as well.

Apart from this, a temporary surge in international prices and the decline in the value of rupee could also upset the calculations adversely impacting reforms in the diesel segment.

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