Diesel prices may be cut by a further Rs2 per litre

The government is likely to announce a further reduction in the retail price of diesel in a day or two while it may keep the price of petrol unchanged at the current level, official sources said.

They expect the cabinet to reduce the price of diesel by Rs2 a litre, as the last installment of fuel price reductions, ahead of the setting in of the moral code of conduct for the general elections due in April-May.

''Government wants to announce the price reduction, on top of the Rs4 a litre cut in two installments since December, before the general elections are announced,'' said an official.

''The cabinet may meet in a day-or-two to decide on the reduction``, he said. ``Most likely, the cabinet may meet tomorrow,`` he added.

A cut in the price of diesel will result in a further fall in inflation rate, already ruling below 4.0 per cent, by making goods transportation, especially fruits and vegetables, cheaper.

Petrol prices are unlikely to be cut as state-owned oil marketing companies - Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation - now sell petrol at a minimum margin while they make Rs3.26 a liter on diesel sales.

The three firms make Rs36 crore a day on diesel sales against a daily loss of Rs24 crore on kerosene sales and Rs9 crore on domestic LPG.