Petrol and diesel prices are the costliest in the country in Andhra Pradesh, Telangana and Kerala, while it is cheapest in smaller states and UTs like Andaman & Nicobar Islands, Delhi and those in the North East, mainly due to differential in local sales tax or VAT rates, oil industry data showed.

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The three state-owned fuel retailers - Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) - last week cut petrol and diesel prices by ₹2 a litre each, ending a nearly two-year hiatus in price revision.

That reduction brought relief to fuel users but rates continue to be above ₹100 a litre mark in some states due to higher Value Added Tax (VAT).

Y S Jagan Mohan Reddy's YSRCP-ruled Andhra Pradesh has the costliest petrol at ₹109.87 a litre, followed by Left Democratic Front (LDF)-ruled Kerala, where a litre of petrol comes for ₹107.54. Congress-run Telangana is close behind with petrol costing ₹107.39 a litre.

BJP-ruled states are not far behind - petrol costs ₹106.45 a litre in Bhopal, ₹105.16 in Patna (BJP in coalition with JD-U), ₹104.86 in Jaipur and ₹104.19 in Mumbai.

Mamata Banerjee's TMC-ruled West Bengal has petrol priced at ₹103.93 a litre. Other states with over ₹100-a-litre petrol are Odisha (₹101.04 a litre in Bhubaneswar), Tamil Nadu (₹100.73 in Chennai) and Chhattisgarh (₹100.37 in Raipur), industry pricing data showed.

Petrol is the cheapest in Andaman & Nicobar Island where it comes for ₹82 a litre, followed by Silvassa and Daman where it comes for ₹92.38-92.49 a litre. Other smaller states too have local VAT, leading to cheaper petrol - Delhi (₹94.76 a litre), Panaji (₹95.19), Aizawl (₹93.68) and Guwahati (₹96.12). Most North Eastern states are among the lower-end of the petrol price band.

Diesel prices have almost a similar story with Amaravati in Andhra Pradesh selling the fuel at ₹97.6 a litre, followed by ₹96.41 a litre in Kerala's capital Thiruvananthapuram, ₹95.63 in Hyderabad and ₹93.31 in Raipur.

The fuel is in the ₹92-93 a litre range in BJP-ruled states of Maharashtra, Chhattisgarh and Bihar. It is also in that range in Odisha and Jharkhand.

Diesel is the cheapest in Andaman & Nicobar Island where it comes for about ₹78 a litre. Delhi - which has the lowest VAT among metro cities - has diesel priced at ₹87.66 a litre, while in Goa it costs ₹87.76 per litre.

Commenting on the price cut, Goldman Sachs said the net marketing margin of the three oil marketing companies will decline to ₹08-09 a litre from ₹1.7-2.7 a litre.

Morgan Stanley said the price cut "should finally remove a key overhang for fuel retailers".

"The ₹2 per litre price cut (our estimate was for ₹2-3 a litre) brings India's fuel basket to $85 per barrel Brent crude (i.e. breakeven fuel marketing profitability at this crude price). However, the implied integrated fuel margins for retailers will average 30 per cent above mid-cycle considering the strength in refinery margins," it said.

JP Morgan said the effect of the reduction is equivalent to about $3.5 a barrel increase in crude oil prices. "Although small on headline, a ₹2 per litre cut will reduce oil marketing companies' revenue / EBITDA by about ₹30,000 crore annualised." A retail price cut, it said, was expected as the three companies had become highly profitable in the last three quarters and ahead of general elections due in a few weeks.

"That prices have been cut one-time and without any signal that pricing goes back to being crude linked (with periodical revisions) can be seen as a negative for these businesses, in our view. Yet, the price cut is relatively modest and seems unlikely to be followed by more (at least near term) - crystallising the risk for these companies." Emkay Global Financial Services said the price cut translates to a reduction of ₹1.6-1.7 a litre in gross marketing margins.

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"In our view, this cut will be effective for next 2-2.5 months and once national elections are over, we would return to a normalised margin scenario. Deepening deregulation with resumption of daily pricing should likely pass any $5-10 a barrel movement in oil prices."

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