Petrol price cut by 2 rupees a litre after public furore

NEW DELHI Sat Jun 2, 2012 9:44pm IST

1 of 3. A vehicle is seen refueled with petrol at a fuel station in Mumbai June 25, 2010.

Credit: Reuters/Danish Siddiqui/Files

Related Topics

Stocks

   

NEW DELHI (Reuters) - State-run oil refiners have agreed to a partial rollback of last month's petrol price increase, a move that was expected after a public outcry over the steepest rise in the country's history.

With effect from Sunday, retail petrol prices will be cut by 2.02 rupees a litre including taxes in New Delhi, state-run Indian Oil Corp (IOC.NS), the biggest fuel retailer in the country, said in a statement.

The three state-run fuel retailers - including Bharat Petroleum Corp (BPCL.NS) and Hindustan Petroleum Corp (BPCL.NS) - tend to move their prices in tandem.

Last month, the companies raised petrol prices by 6.28 rupees a litre, excluding taxes. That translated into 7.54 rupees a litre increase after local taxes in Delhi. The Delhi state government later announced a tax relief, which would have restored increase to 6.28 rupees a litre, but tax cut is yet to be implemented.

Investors and economists had cheered the decision to raise petrol prices for the first time in six months, which allowed the companies to recover some of the losses they had racked up due to higher oil prices and a plunging rupee.

Every one rupee fall in value of the Indian currency against the dollar requires an increase of 0.77 rupees/litre in retail price of petrol, while every dollar decline in delivered prices of Singapore gasoline means prices need to go up by 0.34 rupees.

But the reform provoked dissent within the ruling Congress party-led coalition, furious street protests and a national strike on Thursday organised by opposition parties seeking to exploit popular anger with the increase.

Softening Singapore gasoline prices and global oil prices have partially offset the impact of a declining rupee, offering a window for a cut.

"Since (the) last pricing cycle, though international oil prices have decreased quite significantly, the (dollar-rupee) exchange rate has shown further deterioration," Indian Oil said in the statement, justifying the quantum of price cut.

The three state-run fuel retailers review gasoline prices every two weeks.

Company executives had earlier said that the prices could be revised by June 1 after a regular review of international oil, gasoline and foreign exchange rates.

But June 1 came and went with no change in retail prices amid speculation that the government had not wanted to be seen to be bowing to the opposition-organised protests.

The political backlash, however, has prompted the government to delay implementation of a much bigger reform sought by investors - increasing the price of diesel and kerosene, which are used by the poor and in public transport.

Any increase would fuel inflation at a time when Asia's third-biggest economy is slowing down.

While petrol accounts for around 10 percent of India's annual fuel consumption, diesel demand hovers around 40 percent. Cheaper prices have led to a surge in the demand of diesel cars, especially from a growing middle class.

(Reporting by Nidhi Verma; Editing by Daniel Magnowski and Mike Nesbit)

FILED UNDER:
We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (1)
thambee wrote:
these oil companies and the government don’t see whether election code is in effect while raising the prices,but when it comes to reducing the rates, the election code comes to the fore for these fellows.
why should i pay more for their mistake?

Jun 02, 2012 6:52pm IST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Diwali Sales

Diwali Sales

Gold sales jump about 20 pct for Diwali - trade body  Full Article 

World Bank Rival

World Bank Rival

Three major nations absent as China launches W.Bank rival in Asia  Full Article 

Microsoft Earnings

Microsoft Earnings

Microsoft sales beat Street hopes, cloud profits up.  Full Article 

U.S. Economy

U.S. Economy

Spectre of no-inflation world looms over Fed's return to normal  Full Article 

Insider Trading

Insider Trading

Rengan Rajaratnam, SEC to settle civil insider trading charge.  Full Article 

Wal-Mart India

Wal-Mart India

Murali Lanka appointed as Wal-Mart India operations chief  Full Article 

Market Watch

Market Watch

Betting on the beaten up? Investors pin hopes on stocks in Europe, Japan.  Full Article 

India Insight

India Insight

Kalki Koechlin on her role as a disabled girl in “Margarita, With a Straw”  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage