Indian Railways has extended the validity of the diesel supply rate contracts it had signed in March 2020 by six months till the end of March 2023, according to people in the know, a move that will protect the national transporter from sharp volatility in oil prices.These supply agreements have a clause that binds oil companies to supply diesel to the railways at below retail rates.Typically, a bulk supply of diesel would be available to large buyers like Indian Railways at rates lower than the retail prices. However, present bulk prices are higher as oil companies have not revised retail prices in line with the crude costs.Retail diesel prices were last revised on May 23, 2022. It is estimated that oil companies are selling bulk diesel to consumers such as transport fleets, shopping malls and factories at Rs 25-40 per litre more than retail prices.However, the railways continue to get it cheaper because of this agreement.93258835In June 2019, railways had sought bids for supplying 31.6 lakh kilo litres of diesel for one year. The estimated tender value was Rs 18,340 crore. Bids closed in July 2019 and rate contracts (RCs) were awarded to six companies in March 2020.Indian Oil Corporation Ltd, Hindustan Petroleum Corporation Ltd., Bharat Petroleum Corporation Ltd., and Mangalore Refinery and Petrochemicals Ltd., are the government companies that were awarded the rate contracts.From the private sector, Reliance Industries Ltd. and Nayara Energy Ltd were awarded contracts.In June 2020, during the first wave of the Covid-19 pandemic, an amendment to the agreements removed the one-year period of validity for these contracts.This was apparently done to ensure that the contracted volume of diesel could eventually be supplied to the railways once train services were restarted amid the pandemic.A subsequent amendment in March 2021 extended the validity of these contracts to March 2022. In February 2022, the validity of rate contracts was extended to September 2022, and now to March 17, 2023.