Faced with a public outcry over the steepest increase in India's history, petrol prices were on Saturday cut by Rs2.02 per litre in a partial rollback of the Rs7.54 a litre hike effected more than a week ago.
The first reduction in rates in six months, that will result in price in Delhi going down to Rs 71.16 a litre with effect from midnight tonight from Rs73.18 at present, is a fallout of a dip in international oil prices.
Technically oil companies should have cut rates on May 31 -- the due date as per the practice of fortnightly revision -- but the announcement was deferred in an apparent bid to strip opposition BJP from taking credit for the move.
NDA and Left had on Thursday organised a nationwide strike in protest against the hike, which had also come under sharp attack from allies like TMC and DMK and some ministers in the UPA.
Petrol in Mumbai has been cut by Rs2.12 to Rs76.45 per litre while in Kolkata it has been reduced from Rs77.88 to Rs75.81. In Chennai, the price has been cut by Rs2.13 to Rs75.40 a litre.
Today's decision will come as some relief for consumers battered by double-digit inflation and the May 24 hike - the first in six months and third in a year.
"It has been decided to revise the petrol prices downward by Rs2.02 per litre (including state levies in Delhi)," Indian Oil Corp, the nation's largest fuel retailer, making an announcement on behalf of the industry, said.
"The decrease in other states will vary depending upon the rate of state VAT/sales tax".
Oil companies had last reduced rates by Rs0.78 per litre on December 1 and by Rs2.22 a litre on November 16. The reductions had followed a Rs1.80 hike in rates from November 4.
The Rs7.54 per litre hike on May 24 was done considering an average gasoline price of USD 124.37 per barrel and a rupee-dollar exchange rate of Rs53.17 in the first fortnight of May.
Gasoline price have since fallen to $115.77 per barrel in the second fortnight but rupee-dollar rate has worsened to Rs54.96 to a US dollar during the period.
The fall meant that petrol rates be cut by Rs1.68 per litre, excluding local sales tax or VAT. In Delhi, after including 20% VAT, the reduction will be Rs2.02 a litre.
"Petrol prices are reviewed on fortnightly basis. Since last pricing cycle, though international oil prices have decreased quite significantly, the USD-rupee exchange rate has shown further deterioration," the statement said.
In addition, oil firms are losing heavily on diesel, domestic cooking gas (LPG) and kerosene, rates of which were last revised in June 2011.
"As compared with last price change, current revenue loss on diesel has gone up from Rs6.13 per litre to Rs12.53 per litre, for kerosene from Rs24.16 per litre to Rs 30.53 per litre and for LPG from Rs331.13 per cylinder to Rs396.00 per cylinder," it said.
"At these rates, it is estimated that under-recovery (revenue loss) on sale of sensitive products during 2012-13 shall be around Rs96000 crore for IOC and Rs181,000 crore for the industry," it added.
Oil companies, it said, continue to closely monitor the international gasoline (petrol) prices and exchange rates to assess their potential impact on selling prices in future.
