The government may increase the price of diesel later this month to reduce the rising oil subsidy burden, a senior petroleum ministry official said on condition of anonymity.
The proposal to raise diesel prices has been kept in abeyance for a long time even though oil companies are losing almost R9 a litre from its sale in the retail market.
Diesel prices have not been revised since June 2011 when government increased its retail price by close to R3 per litre. Ever since then the diesel prices globally have risen sharply taking the under recovery of oil companies to a high of about R15 a litre before settling to R9 per litre now.
?This has been the thinking for quite some time. A group of officials and economists must be advising the PMO through the FM. The price rise could come after presidential polls, it is inevitable… but by how much I can’t say,? said the oil ministry official.
After initial reluctance, the oil ministry has also given clear signals to increase the prices of other regulated fuel products to reduce the burden of subsidy in the wake of rising fiscal and current account deficit. Apart from diesel, prices of other regulated fuel products such as domestic cooking gas and kerosene is also likely to increase. The oil marketing companies are currently losing R27.20/litre on kerosene and R319 on every domestic cooking gas cylinder.
There is a general thinking in the government that diesel prices should increase by at least R5 a litre. However, final decision would also weigh political cost attached to the proposed move. Political parties cutting across the party lines are opposed to any increase in diesel prices which they fear would further fuel inflation.