Petrol prices may fall by Re 1 a litre before Diwali

NEW DELHI: Petrol prices are poised to fall to a 16-month low before Diwali as state oil firms plan to cut rates by about Re 1 a litre because the global oil market is in a bear phase, with Brent crude dropping more than 20 per cent since its June peak, government and industry sources said. The government, which regulates retail prices of diesel, is also considering cutting diesel prices as retailers are getting over Rs 3 per litre more than the market rate, sources said. State-run Indian Oil Corporation BSE -0.82 % ( IOC BSE -0.82 %), BPCL BSE -1.32 % and HPCL BSE -0.44 % are expected to hold a meeting this week to slash petrol prices. But, the decision on diesel price cut would require a Cabinet approval, which is expected after assembly elections, sources said.

The Cabinet on June 2010 freed petrol from price control and took an in-principle decision to deregulate diesel prices in an opportune time. In January last year, the government allowed state-run oil marketing firms to raise diesel rates in small monthly doses of around 50 paise per litre until pump prices are aligned with market rate, sources said.

Intent of the government was to deregulate diesel once its pump price was aligned with the market rate. Diesel sales are revenue positive from September, but the government has decided to watch the volatility of the international oil market for some more time before taking a view on deregulating it. The oil ministry is awaiting the decision of higher authorities before the matter is taken to the Cabinet, sources said. It was seen that the demand of petroleum products in Western countries jump during the winter season due to a sudden rise in energy demands for heating. That may lead to a spurt in fuel prices. As diesel price may stroke inflation, the government is taking a very cautious approach, sources said.

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