Petrol, diesel price cut likely as New Year’s gift :: ET

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Petrol and diesel may get cheaper from midnight as the government is pushing the state-run oil marketing firms to pass on the benefit of falling global prices to consumers as a New Year's gift, officials said.

Price reductions may not be very sharp though even as India's average crude oil import bill has fallen by $9-10 per barrel, officials said, pointing out that the gains on account of the global slump in oil markets have been nullified to a large extent due to the rupee depreciation.

The average value of the rupee has dropped to 63.26 per dollar compared to 61.95 two weeks ago.If announced, this will be the ninth consecutive reduction in petrol prices and the fifth cut in diesel rates since its deregulation.

Pump prices of petrol and diesel in India are aligned with the international rates and change every fortnight. The exchange rate plays a major role in determining retail prices of fuels since India imports 80% of crude oil it processes and pays in US dollar.

According to industry executives, state-run refiners are reluctant to slash rates immediately because they want to retain some margins on the two fuels to make up for their inventory losses, which they say have swelled to over Rs 10,000 crore. But the government is keen that companies share gains with the consumers, especially ahead of the crucial Delhi assembly elections expected by February, the executives added on condition of anonymity.

The Bharatiya Janata Party, which heads the NDA government at the Centre, has already started taking credit for falling pump prices of auto fuels to woo Delhi voters through advertisements on FM radio channels, officials said.Auto fuel retailers have slashed petrol prices by about Rs 12 per litre in eight rounds since July 31 and diesel by about Rs 8.50 per litre since the fuel was deregulated on October 18. The retailers may also reduce prices of aviation fuel and market-priced cooking gas on Wednesday, officials said. These companies have reduced the price of non-subsidised cooking gas by over Rs 176 per 14.2 kg cylinder and aviation turbine fuel by Rs 11,090 per kiloliters since the NDA government took charge in May.

The fall in crude oil prices is also expected to lead to a reduction in subsidy on cooking gas from about Rs 280 per cylinder, which is the biggest drag on the exchequer, oil ministry officials said. The government plans to reduce the burden through direct transfer of liquefied petroleum gas or LPG subsidy to the accounts of beneficiaries and plans to launch this mechanism nationwide from January 1.

Besides, the Centre has directed the oil marketing companies to step up vigil to check diversion of subsidised cooking gas to restaurants and other commercial units after consumption of marketpriced cylinders fell 10% whilesales of subsidised cylinders rose 16%.The diversion of subsidised cooking gas escalated after the former UPA government raised the cap on supply of number of cylinders from nine to 12 although the average consumption of cooking gas per household is 7.2 cylinders annually, officials said. However, they added, the NDA government is unwilling to bite the bullet and reduce the cap to a more realistic level just ahead of the Delhi polls.