State-owned oil marketing companies today cut the price of petrol by 95 paise per litre (minus state levies), effective midnight, Indian Oil announced.
The fuel will now cost Rs 67.24 in Delhi, Rs 73.53 in Mumbai, Rs 70.57 in Chennai, Rs 74.55 in Kolkata, Rs 73.73 in Hyderabad and Rs 74.22 in Bangalore.
“Presently, international oil prices are relatively stable. However, there has been significant volatility in the rupee/dollar exchange rate and is currently very weak with uncertainty in its future direction,” Indian Oil said, adding that the trends will be monitored and reflected in future price revisions.
The partially convertible rupee closed at 54.70 per dollar, while Brent crude oil was trading at $110.10 a barrel at 1139 GMT.
Petrol prices were last revised on October 27 when they were raised by 29 paise after the government increased the commission paid to petrol pump dealers.
"There has been some reduction in gasoline rates (against which the domestic price of petrol is benchmarked) giving us some margins (on petrol). But they have moved up again in the last few days," R.S. Butola, chairman of Indian Oil, the nation's largest fuel retailer, said earlier this month.
The government fixes retail prices of liquefied petroleum gas, kerosene and diesel to protect the poor, leading to revenue losses at state-run Indian Oil, Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL).
The government had in June 2010 deregulated petrol prices giving oil companies freedom to fix rates in line with the cost. However, prices have seldom moved in line with cost and oil companies have buckled under political pressure to keep rates checked to help the government manage inflation.
Mr Butola said Indian Oil lost Rs 1,167 crore on selling petrol below cost during the first six months of the current fiscal year. Since the product is deregulated, there will be no subsidy support from the budget to cover these losses.
The Centre will pay Rs 30,000 crore ($5.5 billion) to the state-owned fuel retailers forced to sell at cheaper government-set rates in the first half of the year, Reuters reported last week, citing three sources who saw the Finance Ministry's confirmation letter.
The payout by the ministry, nearly 46 per cent less than the Rs 55,400 crore the Oil Ministry had been seeking, will be released after parliamentary approval is granted, the sources said.
The Finance ministry pays cash subsidies to state oil retailers while state-run upstream companies—Oil and Natural Gas, Oil India and GAIL (India)—sell crude oil and associated products at a discount.
Indian Oil, the largest fuel retailer, will receive a government subsidy of about Rs 16,100 crore, while HPCL and BPCL's share will be about Rs 6,670 crore and Rs 7,200 crore, respectively, they said.
With inputs from agencies