Under-recovery on sale of one litre of diesel rose to Rs 14 over the last couple from around Rs 7 earlier because of rise in crude oil price in the international market and depreciation of rupee.
The rising under-recovery would adversely affect state-run oil marketing companies (OMCs) like IndianOil, Bharat Petroleum Corporation and Hindustan Petroleum Corporation.
Therefore, experts suggest the government to raise diesel price in order to reduce the under-recovery. The hike, however, must be restricted to Rs 2-3 per litre as it can otherwise stoke inflation, experts argue.
Industry sources feel that the under-recovery may widen further if rupee continues to weaken against dollar.
Since a part of the under-recovery is compensated by
upstream oil companies like Oil and Natural Gas Corporation, Oil India, even their financial position would also be adversely hit.