Govt may cut fuel rates, ease price controls

By Nidhi Verma

NEW DELHI (Reuters) - The Government is set to cut fuel prices for the second time in six weeks and allow firms to charge market rates, government and company officials said.

Crude oil prices, below $37 a barrel on Tuesday, have fallen to a quarter of their July peak above $147, allowing the Indian government to consider price cuts, which will help industry and please voters ahead of general elections due by May.

Petrol prices, which were lowered by 10 percent in December, may be cut by a further 11 percent on Thursday, while diesel rates may fall 5.7 percent on top of a similar reduction last month, a government official, who asked not to be named, told reporters at the Petrotech conference on Tuesday.

He said the government was likely to end price controls on transport fuels and allow market-determined prices to prevail.

"We are actively considering deregulating prices of petrol and diesel. I think this is the right time," the official told reporters.

Analysts said deregulation was necessary.

"It will take the politics out of petrol and diesel pricing," said D.K. Joshi, principal economist at ratings agency ICRA.

Deregulation would cheer private refiners Reliance and Essar Oil, which had set up a chain of gas stations and captured 16 percent of the retail market before the government's decision to subsidise sales by state firms forced them to shut their pumps.