India - Govt may cut fuel prices by Dec-end

Saubhadra Chatterji & Rakteem Katakey / New Delhi November 19, 2008, 0:09 IST

As the global crude prices have taken a substantial dip, the UPA government is set to slash the domestic fuel prices. But this price cut will take place only after the current Assembly polling is over on December 24.

According to top sources, the government is all prepared to lower the prices of diesel, petrol and cooking gas (LPG) after the polling is over for the last phase of Jammu and Kashmir Assembly elections on December 24.

“We can’t do it now as it will attract violation of the Election Commission’s model code of conduct,” said a minister who attached to the GoM looking after the issue of oil prices.

As the global crude prices have dipped to $55 per barrel now, petroleum ministry officials say even a Rs 2 to Rs 3 per litre cut in diesel prices would bring down inflation 60 to 70 basis points (100 basis points is equal to one percentage point).

Inflation for the week ended November 1 was 8.98 per cent.

The UPA managers also feel that a cut in the oil prices will not only tame inflation further but it will be regarded as a popular measure among the voters ahead of the General Election.

The petroleum ministry had earlier claimed that the state-run oil companies — Indian Oil, Bharat Petroleum and Hindustan Petroleum — would not incur losses selling petroleum products if crude prices touched $67 a barrel. The Indian basket of crude oil, which is used by domestic refineries, has fallen to $55 now.

Oil companies currently make profits on a third of their petrol sales. The companies sell premium petrol and diesel at around Rs 4 per litre higher than normal petrol and diesel. These firms lose around Rs 2.85 on every litre of normal petrol and Rs 7.26 on every litre of normal diesel they sell.