Fuel prices: Government plans to cut diesel prices by Rs 2 per litre :: ET

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After deferring gas price hike ahead of Assembly elections, the government plans a big cut in diesel prices while state oil firms are preparing to slash petrol rates, a move that can brighten the BJP's prospects in Maharashtra and Haryana.

Diesel prices may fall about Rs 2 per litre next week, the first rate cut for the fuel since January 2009.



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Petrol is likely to fall about 50 paise unless there is a sharp change in international prices or the exchange rate in the next five to six days, government and industry sources said. International diesel rates, the benchmark for pump prices, have fallen this month, while Brent crude oil slipped to a 14 months low of $96.7 per barrel on Thursday as the market is oversupplied.

International prices fell at the time when domestic price caught up with the landed price of imported diesel because of the regular 50 paise per month hike in its rate since January last year.

Domestic diesel price is now about.Rs 2 per litre more than the assumed market price.

Last week, the oil ministry had announced that local rates were about 40 paise per litre higher. "The government plans to take a view on reducing its price after the routine price review, which is scheduled at the end of this month," one source said. The government had decided in January last year to raise diesel prices in small monthly doses until pump prices were aligned with market rates and then deregulate its pricing. Political leaders said the ruling party hopes to gain from the price trends. "The net impact of petrol and diesel price cuts will be in favour of BJP, which is expecting to win Maharashtra and Haryana because of Modi wave and anti-incumbency factor," a BJP source said.

According to a report by PTI, oil minister Dharmendra Pradhan said the government deferred raising gas price because of Assembly elections. "It was done due to elections," Pradhan told PTI, but did not say if it was because the Election Commission had earlier blocked a move to raise prices during general elections.

The two poll-bound states have millions of piped natural gas (PNG) and compressed natural gas (CNG) consumers. A one dollar per unit increase in gas price would raise CNG rate by Rs 2.81 per kg and PNG rate by Rs 1.89 per standard cubic meters in New Delhi.