Oil marketing companies have approached the government to reduce tariffs since they will continue to lose around Rs 210 crore (Rs 2.10 billion) due to a Rs 1.20 per litre under-recovery on diesel.

There will, however, be no under-recovery in case of petrol. Executives in oil marketing companies said the diesel price should have been raised by at least Rs 2 a litre in Delhi.

"We have written to the petroleum ministry informing them that we have increased the prices using the price band mechanism put in place by the Cabinet but the band will be breached in case of diesel. We have, therefore, asked the government to intervene," said an  executive with an oil marketing company.

According to estimates, minus the marketing cost, oil companies have a margin of around 20 paise per litre in case of diesel and 50 paise for petrol.

While raising the price of petrol by Rs 1.10-1.19 a litre and diesel by Rs 1.42-1.69 a litre in the four metros, the oil companies did not alter the selling price of kerosene and cooking gas.

The oil companies lost Rs 3,600 crore (Rs 36 billion) due to the subsidy since the under recoveries in case of kerosene is estimated at around Rs 5 a litre and cooking gas at around Rs 130 a cylinder.

The companies reported under recoveries of over Rs 5,100 crore (Rs 51 billion) during the first quarter of the fiscal, of which Rs 1,800 crore (Rs 18 billion) was accounted

for by cooking gas and Rs 1,831 crore (Rs 18.31 billion) by kerosene sold through the public distribution system. Under recoveries from diesel were estimated at Rs 1,021 crore (Rs 10.21 billion) and Rs 453 crore (Rs 4.53 billion) from petrol.

The government had cleared a new pricing mechanism for oil companies under which they can petrol and diesel prices every fortnight in a band of 10 per cent around the mean of the last three months' rolling average prices and last one year's rolling average process.

The companies will now consider the C&F price of the products instead of the FOB price.

As per the cabinet decision, , oil companies are required to trim their marketing margin and sell below the import parity price if the band was breached. If oil companies continue to bleed, the government will step in to reduce the excise duty.