Petrol price may be cut by up to Rs 2 a litre soon

Mumbai, June 15: Petrol car owners may soon heave a sigh of relief as oil marketing firms are expected to cut petrol prices by up to Rs 2 per litre on Friday due to falling international crude prices. Crude prices, which fell to $96.5 per barrel on Wednesday, the lowest level in the last one year, have provided enough legroom for the oil firms to reduce petrol prices.

State-owned oil marketing firms Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL) will meet on Friday to decide on the quantum of reduction in petrol prices to be passed on to consumers, who suffered the steepest ever petrol price hike of around 10 % last month. This would be the second successive cut in petrol prices after oil firms agreed to roll back petrol prices by Rs 2 on June 2.

Confirming the move, a senior official with India's biggest oil retailer told TOI: "There is scope to reduce petrol prices between Rs 2 and Rs 3 a litre on falling international crude oil prices but the quantum of cut will be ascertained only after adjusting the rupee's fall against the US dollar."

Here's how the arithmetic works. Every dollar reduction in international oil prices translates into a cut in product price by 33 paise. But every time the Indian currency depreciates against the dollar by one rupee, it translates into a requirement to raise prices by 77 paise. In the current context, oil prices have reduced by an average of $7 while the rupee has depreciated by 50 paise against the dollar. In rupee terms, the fall is pegged at 7.7% or Rs 451 to Rs 5392.88 per barrel on Wednesday from prices of Rs 5844.36 per barrel in the last fortnight.

"We review petrol prices on a fortnightly basis, which not only depends upon international crude oil prices but also on international product prices and exchange rate fluctuations. It's true that crude oil prices have fallen but at the same time the rupee has also depreciated against the dollar to Rs 55.79 from Rs 55.36, when the prices were last reviewed," BPCL chairman R K Singh told TOI. After reviewing global product prices and adjusting for exchange rate fluctuations, we will be happy to pass on the benefit to consumers", he said.

Echoing similar feelings, HPCL finance director B Mukherjee said that though the Indian basket of crude oil prices has fallen to $96.5, they would have to take the average of the last two weeks to decide on the petrol prices.

Earlier this week, finance minister Pranab Mukherjee had hinted at a reduction in petrol prices on falling crude oil prices. "A reduction in petrol prices will set the stage for the government to increase diesel prices after the presidential elections gets over as oil firms are losing Rs 12.5 per litre on sale of diesel, which is an administered product," said an oil analyst. Oil firms are losing over Rs 450 crore per day on sale of sensitive petroleum products like diesel, cooking gas and kerosene with effect from June 1.