On 18 October 2014, the Union government decided to deregulate the diesel price, meaning that price of diesel henceforth will be linked to the market price. It also means the happy days of subsidies have finally ended.
Since 2008, when crude oil prices touched nearly $150/barrel, diesel had been the biggest bugbear for oil companies of India, with retail losses averaging ₹50,000 crore annually which were eventually squared up in a government-formulated compensation mechanism.
It is now nearly two decades back when a government-nominated panel under former BPCL chief U. Sundararajan had first advocated deregulation of fuel prices.
In 2002, the Vajpayee-led NDA gave the go-ahead to free petrol and diesel prices but the UPA regime reversed this ruling when it took charge two years later.
Petrol prices were finally deregulated in 2010 and the transition worked very well.
The deregulation will soon see the private players like Reliance and Essar reviving their fuel retail business. As a result, the arena is going to become more competitive.