A hike in diesel prices by 50 paise is expected to be announced soon as the oil firms have started losing Rs 11.26 per litre of diesel with effect from March 1 compared to loss of Rs 10.27 per litre in the previous fortnight starting February 16, 2012, said sources in the oil firm. Private retailers like Reliance Industries (RIL) and Essar Oil have also increased petrol prices by similar amount, said sources in the know. 

The oil comapnies attribute the hike to increase in petrol prices in the international market by $2.5 per barrel and depreciation of Indian rupee by 72 paise since the prices were last revised on February 16 by Rs 1.50 paise a litre (excluding VAT). 

"The combined impact of these two factors has compelled the company to revise the prices. The corporation does not have any other option but to pass on the increase in MS prices to consumers as the corporation has already suffered losses on sale of MS during the year," said a statement by Indian Oil Corporation (IOC), India's biggest fuel retailer justifying the hike. 

This is in spite of softening of the crude oil prices in the international market. The Indian basket of crude oil has fallen to Rs 108.44 on February 28 compared to Rs 111.49 in the previous fortnight starting February 16, 2012, according to the Petroleum Planning and Analysis Cell (PPAC) under the oil ministry. 

Interestingly, in rupee terms also the price of Indian basket of crude oil has fallen to Rs 5830.82 per barrel on February 28 compared to Rs 6033.84 in the previous fortnight starting February 16, 2012. Indicating the petrol prices may be revised downward if the international petrol prices fall, the IOC statement said, "It may be added that international petrol prices over the year have shown spurt during the first quarter of the calendar. They generally start levelling back during the second quarter. Keeping this trend in view, we do believe that there should be opportunities to revise the prices downward as and when the international petrol prices soften." 

OMCs under recoveries effective March 1, has come down to Rs 432 crore on the sale of diesel, kerosene and cooking gas from Rs 454 crore per day for the previous fortnight effective February 16, 2013.