Petrol to cost Rs 2 less a litre

Petrol will be cheaper by almost Rs 2/litre effective tonight, the first cut since January 2009.

Passing on the benefits of fall in global rates to domestic customers, the public sector oil retailers — Indian Oil Corporation, Hindustan Petroleum Corporation, Bharat Petroleum Corporation — have cut petrol prices by Rs 1.85 a litre (excluding State taxes and levies). The reduction comes at a time when the Government is facing flak from allies and Opposition on rising prices of essential commodities.

The exact price cut for users would vary from one State to another depending on local taxes. On the retail front, the price cut in Delhi is expected to be Rs 2.22/ litre, Rs 2.31/ litre in Kolkata, Rs 2.34/ litre in Mumbai and Rs 2.35/ litre in Chennai.

In sync with public sector oil retailers private players such as Essar have also reduced the price.

The oil companies revise the price on the basis of fortnightly average of international oil prices. The factors resulting in the revision are generally the international price (f.o.b) of product and currency fluctuation. The price of motor spirit in the global market was lower than the price at which Indian refiners buy their crude oil. The Indian crude basket on November 14 stood at $112.44 a barrel (Rs 5,631 a barrel).

In a statement issued here, Indian Oil Corporation said that “the reduction has been possible as a result of favourable impact of slide down both in the international prices of petrol and in the rupee/dollar parity.”

The rupee versus dollar exchange rate, which had moved up in the second fortnight of October 2011, came down marginally and was more or less stable at around Rs 49.30 versus the dollar in the first fortnight of November.

Rupee depreciation

However, the companies cautioned that the rupee has suffered significant depreciation in the last two days and if the rupee versus dollar parity remains at this level or moves further away, its impact would get reflected in the next pricing cycle. On June 26, 2010, the Government had allowed the retailers to revise the petrol prices in tandem with the prevailing market price. Since then, petrol prices have increased six times, with no reductions.

The pricing decision in respect of diesel, kerosene under public distribution system and domestic LPG is taken by the Government. The oil retailers have been sharing the impact of under-recoveries on them.

In case of diesel, the international prices have firmed up (a trend opposite to petrol) during the fortnight. As a result, the under-recovery of Indian Oil Corporation on selling the product at a controlled price has increased to Rs 10.17/ litre from Rs 8.58. The pricing of kerosene and domestic LPG follows a monthly cycle and, therefore, on these two products, the under recovery remains at Rs 25.66/ litre and Rs 260.50/ a cylinder, respectively.