While Moily has guaranteed Prime Minister Manmohan Singh that an increase in petrol price was unlikely, he said it was impossible to reverse the decision of the Cabinet Committee on Political Affairs (CCPA) in January 2013 that allows oil marketing companies to raise diesel price by 40-50 paise per litre each month until the under-recovery was wiped out.
Moily assured the Prime Minister on March 21 that an analysis of petrol pricing mechanism, in consultation with the OMCs, had shown that it is likely that the price of petrol will not be increased during the next two months.
But on capping diesel price, he wants an approval from the Election Commission (EC) on reversing the CCPAs decision of January 2013 as the model code of conduct was in force.
Any new proposal to the CCPA, he wrote, would need prior EC consent also because one of its members had been quoted as saying that the commission would certainly look into the issue in case the government decided to discontinue with the monthly increase on diesel price.
Besides the EC threat, Moilys rationale for continuing with the diesel price hikes is that the oil marketing companies were currently incurring an under-recovery of Rs 8.37 per litre on the fuel even though the marginal price increases since January 2013 had resulted in an overall raise of Rs 8.33 per litre.
In view of the above, it is not possible to discontinue the monthly increase in diesel price at this point of time unless a No Objection is obtained from the Election Commission and the earlier decision of January 17 is reviewed by the CCPA, says Moilys letter to the Prime Minister.
The PMO may advise the ministry on the further course of action, he added, putting the onus of maintaining status quo in diesel price on the Prime Minister. There has been no formal response from the Prime Ministers Office, said sources.
The country votes for a new government at the Centre in nine phases that start on April 7 and end on May 12. The recent drubbing of the Congress party in three out of four states that went to the polls last November-December raised a clamour within the party for a government rethink on diesel pricing scheme.
Moily has been maintaining that the hikes should continue, as any decision to stop them would worsen market sentiments and hit the earnings of the oil companies, some of which are in the red.
When the CCPA last year decided to increase diesel prices marginally each month, the losses on the fuel sales stood at Rs 10.80 per litre.
After 14 hikes as of February 28, the gap still remains as wide due to a rise in global crude oil price and a steep fall in the value of the rupee against the dollar.
* Oil minister M Veerappa Moily has said that it would be impossible to reverse the CCPA decision of January 2013 that allows oil companies to raise diesel price
* Any hike during election season is set to give a negative image to the UPA government
* Reversal of the CCPA decision will need approval from the EC, as also any proposal to cap the diesel price