Petrol, diesel price cut from Thursday

Updated at 2.30pm

 

NEW DELHI: In the first substantial cut in fuel prices in over two years, the government on Wednesday slashed petrol prices by Rs two a litre and diesel by Re one a litre, effective Wednesday midnight.

 

Petrol in the national capital will now cost Rs 44.85 a litre, while diesel price will come down from Rs 32.25 a litre to Rs 31.25 per litre.

 

The price reduction would inflate losses incurred by oil companies on sale of diesel and reduce profits that they earn on petrol sales.

 

While loss on diesel would go up to Rs 2 a litre from Rs 1.01 at present, profits on petrol would shrink to Rs two per litre from Rs 3.67.

 

The prices were last reduced on November 16, 2004, but were raised thrice subsequently -- the latest being June 5 this year.

 

"The Chairperson of the UPA and the President of the Congress party, Sonia Gandhi had (yesterday) drawn the attention of the government to suitably reduce the prices of petrol and diesel for protecting the interest of the consumers in general and of vulnerable sections in particular," Petroleum Minister Murli Deora said in a statement tabled in Parliament.

 

Deora had only last week stated that the government would consider reducing fuel prices if losses on diesel are wiped out by a suitable fall in international oil prices. He had pegged the trigger for a cut at around 52 dollars a barrel. The Indian basket is currently trading at 56.8 dollars a barrel.

 

Finance Minister P Chidambaram said the price cut will help ease inflation to some extent.

 

Deora said since there was substantial losses on LPG and kerosene, the prices are not being changed.

 

Before the price cut, oil companies were making a profit of Rs 78 crore per day on petrol but were incurring a loss of Rs 34 crore a day on diesel.

 

Government had on June 5 raised petrol price by Rs 4 a litre and diesel by Rs 2 per litre.

 

However, subsequently, some states like Delhi cut sales tax on auto fuels. Petrol price in Delhi fell by Rs 0.66 a litre to Rs 46.85 per litre while diesel came down from Rs 32.47 a litre to Rs 32.25 per litre.

 

"Today, the prices of international crude are in the range of 56-58 dollars per barrel. The extent of losses/under recovery on petrol and diesel combined has come down. However, the situation with regard to LPG and kerosene continues to remain difficult as no price increases were made in these products," Deora told the Parliament.

 

Oil firms lose Rs 14.40 on every litre of Kerosene sold through the Public Distribution System (PDS) and are losing Rs 114 on sale of every 14.5 kg domestic LPG cylinder.

 

"We continue to provide kerosene at about Rs 9 per litre with a subsidy of about Rs 14 per litre, to the most vulnerable groups. This is in line with the commitment of the Common Minimum Programme (of governance of UPA government)," he said.

 

Further, this subsidy on fuel complements the subsidy on foodgrains to Below Poverty Line (BPL) families.

 

"Keeping the totality of circumstances in mind, the government under the guidance of Prime Minister Manmohan Singh has decided to reduce the retail selling prices (at Delhi) of petrol by Rs two per litre and that of diesel by Re one per litre with effect from midnight tonight for public sector oil marketing companies," Deora said.

 

Deora said international crude oil prices have remained high over the last one year putting a heavy burden on the economy and oil companies.

"The UPA Government under the Common Minimum Programme has remained steadfast in its commitment to protect the common man and the most vulnerable sections of our society and therefore has not increased the prices of PDS Kerosene and domestic LPG in the last 2 years," he said.

 

The government, he said, had evolved a policy of equitable burden sharing to deal with the consequences of high international oil prices.

 

"Accordingly, 87 per cent of the burden of increased international oil prices was shared by the government through oil bonds and the oil PSUs. Only a marginal increase in prices of petrol and diesel of Rs 4 and Rs 2 respectively cane into effect in June 2006 against the required increase of about Rs 10 per litre each," he said.