Petrol prices to be cut Rs 1.89-2.38/litre tomorrow

This would be the steepest decline in 11 months

Oil marketing companies (OMCs) will cut petrol prices in a range between Rs 1.98 and Rs 2.38 a litre effective Friday, petroleum minister Dharmendra Pradhan said. This would be the steepest decline in the 11 months since October 2013 when prices were cut by Rs 3.6 a litre. After the cut, non-branded petrol will be sold at Rs 70.33 a litre in Delhi.

Pradhan tweeted the decision at 4:21 pm, 30 hours before the new price comes into effect, and marked the first instance of a fuel price revision being announced through social media. Currently, OMCs announce price revisions only hours before the new price is effected to avoid hoarding. The minister's tweet was followed by a statement from Indian Oil Corporation (IOC).

Petrol prices were decontrolled in 2010. Since then, OMCs have been revising prices every fortnight in line with global oil prices and the rupee-dollar exchange rate. Prices were previously revised on July 31 through a Rs 1.09 cut per litre. The Indian basket of crude oil has dipped from $106.1 a barrel on July 30 to $102.5 a barrel on Tuesday on oversupply in the global markets, coupled with easing concerns over supply disruptions in Iraq.

IOC, India’s largest OMC, had on Tuesday indicated that prices might be revised downwards because of softening of global rates. “Petrol is a decontrolled product and prices increase or decrease depending on input cost every fortnight. We had cut rates on August 1 and will be reviewing prices on August 15. There are some positive indications,” IOC chairman B Ashok had said Tuesday when asked if prices could be cut in view of declining oil prices and a stable rupee.

The price cut further bridges the gap between petrol and diesel prices. Since January 2013, the government has been increasing diesel prices by 50 paise a litre every month. Since then, diesel prices have gone up by a cumulative Rs 11.1 a litre in 18 instalments and are likely to be completely decontrolled by December.

OMCs are currently losing Rs 1.33 a litre on sale of diesel below market rates. The fuel is currently priced at Rs 58.4 a litre in Delhi.

A revision in diesel prices is due on September 1. Overall, the three OMCs are likely to report under-recoveries of Rs 91,000 crore in the current financial year, compared with Rs 1,39,000 crore last year, on subsidised sales of diesel, kerosene and liquefied petroleum gas.