Another cut in petrol price likely as global crude prices soften

Oil marketing companies review meet today; no change likely in prices of diesel, LPG and kerosene

The continued economic acrimony in the eurozone and the continued slowdown of the U.S, economy has softened the international crude oil prices, raising hopes of another petrol price cut by the oil marketing companies (OMCs) when the matter comes up for review on November 30.

With the Indian basket averaging around $107 per barrel, the petrol prices are likely to be cut by another one rupee, the second reduction this month. The OMCs on November 16 cut the fuel prices by Rs. 2.22 per litre. Petrol now costs Rs. 66.42 in Delhi.

“The oil prices are to come up for fortnightly review on November 30 and another reduction can be expected,” a senior OMC official said.

The prices of international crude oil have averaged $107 per barrel for the Indian basket during the second half of November as against $115.85 per barrel averaged during the first fortnight that formed the basis for the Rs. 2.22 per litre cut.

However, officials rued that some of the gains made by the drop in international prices have been taken away by the appreciating rupee, which has averaged above Rs. 52 to a U.S. dollar as against Rs.49.30 to a dollar in the first fortnight of November.

The government authorised the OMCs to revise petrol prices, which was decontrolled in June last year. “The reduction in oil price warrants a cut of around one rupee per litre in the petrol price including taking into account the tax incidence.”

This would be the second reduction in petrol price since January 2009 when rates were cut by Rs. 5 per litre.

Before that, the then Petroleum and Natural Gas Minister Murli Deora made oil firms slash the petrol price by an equal proportion in December 2008.

However, no change is likely in the prices of diesel, domestic LPG and kerosene, which continue to be subsidised heavily.