The stage is set for another cut in retail prices of petrol by about Re 1 a litre. But, whether this happens will depend on the oil retailers.

If the prices are reduced on Wednesday (night/Thursday), this would be the second cut in a month. Politically, this will work out in favour of the UPA Government, which has been drawing flak for rising costs. Though, last June, the oil retailers where given freedom to revise petrol retail prices, an informal Government control remains.

“In the current price situation, the base price of petrol could be reduced by Rs 0.85 a paise (excluding taxes and levies),” an oil industry official said.

The oil retailers revise the price on the basis of fortnightly average of international prices. The factors resulting in the revision are generally the international price (f.o.b) of product and currency fluctuation. Softening of Singapore spot petrol price will offset the impact of rupee depreciation, the official added.

Private oil retailers — Essar and Reliance — generally wait for the public sector retailers — Indian Oil Corporation, Bharat Petroleum, and Hindustan Petroleum — to effect any revision in auto fuel prices.

However, the auto industry has adopted a more cautious approach to changes in petrol prices as it feels that prices may go up again.

Says Mr Vishnu Mathur, Director-General, Society of Indian Automobile Manufacturers, “Although a rupee drop in petrol price is negligible, it is a step in the right director. In the long term, we can expect parity in the petrol-diesel prices, the differential of which stands at 1.6 times at present.”

Public sector retailers continue to sell diesel, kerosene sold under public distribution system, and domestic LPG at a Government controlled price. This, according to the Government, is done to insulate the consumers from the volatility in international crude oil and product prices.

The Petroleum Minister, Mr S. Jaipal Reddy, had recently informed the Lok Sabha, “The average price of Indian basket of crude oil which was $85.09 a barrel in 2010-11 has now increased by 30 per cent and the average price during the current financial year is at around $110 a barrel. Coupled with the upward price movements, the public sector oil retailers have also been hit by depreciation of rupee, which has fallen from an average Rs 45.58 versus dollar last year to over Rs 50 versus dollar in November 2011.”

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