India on Thursday allowed state-run energy firms to hike diesel prices by a small amount in a move to partially deregulate the sector and reduce a deficit-widening subsidy burden.
The government deregulated petrol prices in 2010 in a reform aimed at reducing the subsidies it pays to fuel refiners but it has continued to set prices of diesel used by millions of farmers, truckers, transporters and bus operators.
"The companies are authorised to make price revisions from time to time" following "an earlier proposal to deregulate diesel prices", Oil Minister Veerappa Moily said in New Delhi following a cabinet meeting.
Oil companies would be allowed to increase prices of diesel by a "small quantum", Moily said, with a price rise expected to come within a week.
The refiners currently lose nearly 10 rupees ($0.18) a litre on the sale of diesel. Diesel sells for 47.15 rupees a litre.