Petrol price cut by 65 paise per litre; decision on diesel price after PM's return

State-owned oil marketing companies today announced a 65 paise reduction per litre of petrol even as they kept the price of diesel unchanged. The revised rate for petrol will be effective from midnight.

"RSP of petrol in Delhi shall decrease by Rs0.65/litre (including VAT), with corresponding decrease in other states," Indian Oil Corp, the country's largest fuel retailer, said in a statement.

OMCs were expected to announce a reduction in the retail price of diesel by about Re1 per litre, the first reduction in rates in over five years, and a simultaneous reduction in the prices of petrol by 55 paise.

Though today is the scheduled fortnightly review of petrol and diesel rates, an announcement on diesel prices will be made only after Modi returns from his US trip tomorrow evening, hinting that the government may announce a decontrol of diesel also from administered prices.

Industry officials feel it is the right time for lifting price control on diesel as state-owned oil firms are set to announce a reduction in rates, made possible by the softening in international oil rates.

Diesel price is likely to be cut by about Re1 per litre, the first reduction in rates in over five years, after the PM returns from the US.

Softening of crude prices meant that diesel under-recovery, or the difference between retail price and its cost of production was wiped out and there was an over-recovery of 35 paise a litre from 16 September. This over-recovery is now about Re1 a litre.

While the government had resisted the temptation to cut rates then, prices are likely to be reduced at the fortnightly review due Tuesday.

Sources said oil ministry is of the view that while the Cabinet Committee on Political Affairs (CCPA) had on 17 January 2013 allowed a monthly increase in diesel price of 40-50 paise per month to wipe out the under-recovery, it is logical that the price be cut when there would be over-recovery.

Oil minister Dharmendra Pradhan is believed to have already written to Prime Minister Narendra Modi on the emerging scenario.

Also, the government needs consent of the Election Commission for the price cut in view of state assembly elections in Maharashtra and Haryana.

Oil companies calculate the desired retail selling price of petrol and diesel on 1st and 16th of every month based on average international benchmark price and rupee-dollar exchange rate.

Petrol prices were last revised on 30 August when the fuel was made cheaper by Rs1.82 a litre while diesel was made expensive by 50 paise per litre.