Govt allows tweak in diesel price; ONGC, HPCL soar 5-8%

State-controlled oil & gas companies rallied quite sharply amid heavy volumes on Thursday after oil minister Veerappa Moily said that the government has authorised oil marketing companies (OMCs) to change diesel price from time to time.

Moily said OMCs were authorised to change diesel prices in small amounts. "OMCs have been losing Rs 94,000 crore per year on subsidised diesel," he added.

The government had earlier decided to deregulate diesel.

Oil Secretary G C Chaturvedi said the government would continue compensating PSU companies for revenue loss. "Small price change is okay, but diesel pricing is not deregulated," Chaturvedi added.

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Oil and Natural Gas Corporation touched a 52-week high of Rs 320.80. At 14:11 hours IST, shares rose 4.83 percent to Rs 318.05 on Bombay Stock Exchange. Oil India too gained more than 5 percent.

Downstream companies like Bharat Petroleum Corporation, Hindustan Petroleum Corporation and Indian Oil Corporation shot up 5-8 percent.

Meanwhile, cabinet also approved hike in subsidised LPG cap to 9 cylinders per year that would be effective from April 1, 2013, Moily said. Sources also add that oil ministry may meet fuel retailers on diesel today as it is pushing for a diesel price hike by tongiht.

The government said under-recovery on diesel rose to Rs 9.60 per litre from Wednesday. "OMCs incurring daily inder-recoveries of Rs 384 crore," the government added.

In December, oil ministry, in a note sent to cabinet, recommended raising diesel prices by Re 1 per month for next 10 months.