Prime Minister’s economic advisory panel (PMEAC) has said a hike in diesel prices may be deferred to next fiscal due to high inflation rate.

“Perhaps, if by March 2011, the inflation rate comes to about 6 per cent, perhaps that may be the time at which they may revise the diesel prices,” PMEAC chairman C Rangarajan told a news agency.

A meeting of a ministerial panel headed by Finance Minister Pranab Mukherjee, to consider raising diesel price by at least Rs 2 a litre, was deferred twice last month and no new date has been notified yet.

State oil firms currently sell diesel, the most consumed fuel in the country, at a loss of Rs 6.99 a litre and have been pressing for an increase in retail prices to narrow the losses.

Indian Oil Corp, Bharat Petroleum and Hindustan Petroleum together lose about Rs 128 crore per day on sale of diesel below the imported cost.

The losses have widened after global crude oil prices touched a two-year high of USD 92 per barrel.

Crude was ruling around USD 74 per barrel in June, when diesel prices were last revised.

The government had in June freed petrol prices from its control and stated that diesel price will be made market determined in due course.

However, the rising crude oil prices has derailed those plans with state oil companies even selling petrol at a loss of Rs 1.25-1.50 a litre.

Rangarajan has always been in favour of freeing diesel prices from government control and linking it to global prices.

“Possibly, the petroleum prices will be adjusted to the international crude price,” he added.

However, inflation rate, particularly the food inflation is very high and if prices are raised now, it could add to inflationary pressure.

Food inflation surged to a ten-week high of 14.44 percent for the week ended 18th December as prices of vegetables — onions, in particular–besides fruits, cereals and protein based products continued to escalate.

Overall inflation in November stood at 7.48 percent, down from 8.58 percent in the previous month.

Following the spike in food prices, PMEAC has revised upwards its projections for overall inflation at the end of the 2010-11 financial year to 6 percent, as against the earlier estimate of 5.5 percent.

Finance Minister Pranab Mukherjee has said that overall inflation could moderate to around 6.5 percent by March-end, as against the 6 percent projection in the Finance Ministry’s Mid-Year Review.