By IANS,
New Delhi : India Friday allowed its state-run fuel retailers to cut prices of gasoline and diesel for the first time in 22 months to give a boost to its slowing economy, with cushion coming from the $100 per barrel drop in global crude oil prices.
Companies like Indian Oil Corp were allowed to cut prices by Rs.5 a litre on gasoline and Rs.2 a litre on diesel. The prices of cooking gas distributed to households under a subsidised system were, however, kept unchanged.
The move came ahead of a multi-billion rupee, sector-specific fiscal package expected from the government Saturday to pump prime the Indian economy and shield it from the impact of global slowdown.
“We are reducing the prices with effect from midnight,” Petroleum Minister Murli Deora told reporters after the price cuts were cleared at a meeting chaired by Prime Minister Manmohan Singh.
Petrol will now retail in the national capital at Rs.45.62 a litre, while diesel will be sold for Rs.32.86, according to the revised tariff available with Indian Oil Corp, India’s largest fuel-retailing company.
In Mumbai, the revised prices of these two fuels are Rs.50.04 and Rs.36.93, respectively. In Chennai, the revised prices are Rs.50.07 and Rs.35.13, while in Kolkata they are Rs.47.52 and Rs.33.81.
“This will be a huge relief, both in terms of psychological impact and economic benefit,” said Rajesh Shukla, senior fellow at the National Council for Applied Economic Research (NCAER), an economic think tank.
“This will come as a big relief for the common person as it will have a direct impact on daily pocket expenses. Some major items for households like groceries are routed through road transport. This will now come down,” he told IANS.
Petroleum ministry officials had said last week that out of four fuel products where the government was controlling prices, state-run oil marketing firms were earning a profit of Rs.8.17 a litre on petrol and 65 paise a litre on diesel.
But on cooking gas, there was still a loss of Rs.330.20 per 14.2 kg cylinder, while for kerosene, the loss amounted to Rs.21.54 a litre.
They had said that even on the prevailing retail prices, state-run oil marketing firms were having to contend with an annual loss of Rs.1,100 billion ($22 billion) despite crude oil becoming cheaper by nearly $100 billion.
The government had raised prices in June, when the international oil prices were about $130 a barrel. Since then, global crude prices have fallen consistently, but the ministry did not push for fuel price cuts.
It said the depreciating rupee was eroding the gains from falling crude rates.
“The fuel price cut will have some amount of relief for people but it won’t ease all the problems faced by auto companies,” said Abdul Majeed, automotive partner with PriceWaterHouseCoopers, a global accounting and financial consultancy.
Several Asian economies like Indonesia and Vietnam had also cut retail prices of transport fuels in recent weeks, while China that accounts for the bulk of the incremental demand for oil, along with India, kept them unchanged.