NEW DELHI/MUMBAI India aims to include the bulk price of diesel fuel in its calculation of wholesale price inflation as early as February, two government officials with direct knowledge of the matter said, in a change that is seen adding to upward pressure on the headline inflation rate after New Delhi's move last week to deregulate prices.
However, the timing of the inclusion of bulk diesel prices in the wholesale price index (WPI), is still uncertain, they said, as it depended how quickly oil companies made their new price data available.
India deregulated diesel prices by allowing fuel retailers to raise the price of subsidised diesel by 45 paise a litre every month and asking bulk buyers to pay market rates.
Wholesale price index data for January will be released on February 14. Diesel has a 4.67 percent weighting in the index.
A large section of economists are projecting their inflation numbers factoring in only increases in retail diesel prices.
Economists said including both bulk and retail prices in WPI could add about 25 basis points to headline inflation, with higher pump prices adding 6 basis points and bulk sales the remainder.
"Since we are not sure how the bulk prices will be calculated for measuring WPI, we have not included that in our estimates for WPI," Samiran Chakrabarty, head of research, Standard Chartered Bank India.
India's headline inflation slowed in December to 7.18 percent, its lowest in three years and below expectations, fuelling expectations that the RBI will cut interest rates next week for the first time since April.
The government has asked the oil companies to provide them an average price under the dual pricing for calculating the wholesale price index, but officials were unsure when the data would be made available.
"We have already initiated the process. It would be reflected in the WPI index as soon as we start getting the data (on dual pricing of diesel)," a senior official at the Ministry of Commerce and Industry, who declined to be named because he was not authorised to speak on the matter, told Reuters.
"It may take two weeks, four weeks, or two months," he said, adding the ministry releases provisional monthly WPI inflation data and in case there was delay in getting the data, it may be reflected in final numbers released with a lag of two months.
Bulk diesel sales account for 20 percent of total diesel sales made by state-run oil refiner Indian Oil Corp (IOC.NS) and 9 percent for Bharat Petroleum Corp (BPCL.NS), officials at these companies said.
Railways, the military, government transport systems, cement and power plants and miners are bulk buyers of diesel, and will all pay market prices under the new measure.
(Writing by Suvashree Dey Choudhury; Editing by Tony Munroe and Simon Cameron-Moore)
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