The government has cleared all doubts over a possible increase in the price of

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diesel. “There is no proposal for increase in the price of diesel,” newly-appointed oil minister S Jaipal Reddy said on Thursday. Reddy, who has succeeded Murli Deroa, was earlier the minister for urban development.

The UPA-led government is already fighting high food prices even though food inflation has come down to 15.52 per cent for the week ended January 8 from 16.91 per cent in the previous week. Finance minister Pranab Mukherjee has pegged overall inflation at 6.5 per cent by March. Increase in the price of diesel will push inflation further northwards.

Government freed petrol prices from its control in June last year. However, prices of three other petroleum products — diesel, kerosene and domestic cooking gas — are regulated by Centre.

Reddy said that oil ministry would continue discussions with finance ministry to compensate oil-marketing companies (OMCs) for losses incurred on selling fuel below the market price.

The oil companies are expected to incur a loss of Rs 72,000 crore in current financial year. “These losses are not collected from people,” Reddy said, adding, finance ministry has released Rs 13,000 crore for the first two quarters of the current year.

“We hope to get another Rs 36,000 crore from the finance ministry. Our upstream companies (ONGC, OIL and Gail) will absorb a shock of Rs 24,000 crore and downstream will absorb another Rs 12,000 crore,” the oil minister said.

Crude oil prices at the New York Mercantile Exchange (NYMEX) have declined for the third day. Crude price for February contract dipped to $90.40 per barrel on Thursday.

“I have reasons to believe some moderations in global market will take place in next few months,” Reddy said. When asked if the government plans to deregulate diesel prices, as earlier said by prime minister Manmohan Singh, Reddy said, “I don’t think anybody can take such long-term decisions.”

Moreover, the oil ministry will seek rollback of customs and excise levies on crude oil and petroleum products, which was imposed in Union budget 2010-11.

Mukherjee restored the basic duty of 5 per cent on crude oil, while 7.5 per cent on diesel and petrol and 10 per cent on other refined products in his last budget. He also increased the central excise duty on petrol and diesel by Re 1 a litre each.

Meanwhile, Reddy indicated that acquiring energy assets overseas is vital for moving towards energy security. At the same time, participation of global players is important in the domestic fields. “We need investment in the oil sector to tap our own resources. We also need their (global giants’) management expertise,” Reddy said.