"Until further orders, oil marketing companies can increase it (diesel price) by 40-50 paise (per litre) every month," he told reporters here. 

The government had on January 17 decided to move towards deregulating or freeing diesel prices from state control and gave powers to state-owned oil firms to raise prices in small measures every month till all of their losses are wiped out. 

Diesel is currently sold at a loss of over Rs 10.80 per litre. 

On January 17, oil firms hiked diesel price by 45 paise. After including local VAT, the increase in Delhi came to 50 paisa. The diesel now costs Rs 47.65 a litre in the capital. 

Moily said the decision to raise diesel prices in small doses every month will stand "until further orders". He, however, did not say when the oil firms will effect the second price increase. 

The decision for retail price hike was coupled with a move to charge bulk consumers like defence, railways and state transport undertakings market price which is almost Rs 10 a litre more than retail selling rate, to save an estimated Rs 12,907 crore in annual subsidy. 

Moily said he had heard of states like Gujarat and Tamil Nadu asking their public transport fleet to refuel at petrol pumps instead of buying diesel from oil firms directly as is the current practice. This is being done with a view to avoid paying the market price mandated for them. 

"We need to look into that (issue). I have also heard about it. We are ceased of that matter," he said, adding when rules are laid there are people who find ways to circumvent it. 

Instead of buses being asked to refuel at petrol pumps, the states should reduce high local sales tax or VAT on diesel to cut prices, Moily added.