The Hindu Business Line : Petrol, diesel to cost less

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New Delhi Feb. 15 For the second time in three months, the UPA Government has announced a reduction in the retail selling prices of petrol and diesel by Rs 2 per litre and Re 1 per litre, respectively. Terming it as a move to check soaring inflation, the Petroleum Minister, Mr Murli Deora, said the reduced prices would be effective from midnight tonight.

The Government had announced identical price reduction in November last year. "The burden of this price reduction will be met partly by revenue (in terms of duty restructuring) and partly through oil bonds already approved by the Government," Mr Deora said. The Finance Ministry is expected to announce duty adjustments such as cut excise duties in the course of the Budget presentation later this month.

Speaking to presspersons, Mr Deora said a decision to this effect was taken at a meeting he had with the Prime Minister, Dr Manmohan Singh, and the Finance Minister, Mr P. Chidambaram on Wednesday. UPA Chairperson, Ms Sonia Gandhi, seems to have played a vital role in this decision-making. The Petroleum Minister said that ``it was Ms Sonia Gandhi's commitment that the June 2006 hike of Rs 4 a litre in petrol and Rs 2 a litre in diesel will be rolled back when international prices fall. Now that the prices have declined, we have rolled back the entire amount in two instalments.'' With this reduction, the retail-selling price at Delhi for petrol will be Rs 42.85 per litre and Rs 30.25 per litre on diesel. The prices have been reduced taking the average of the Indian crude basket for the first fortnight of February at $56.12 per barrel. The Indian crude basket on Wednesday stood at $55.49 a barrel.

The Petroleum Secretary, Mr M.S. Srinivasan, said that in June 2006, the Ministry had estimated that the under-recovery on sale of four petroleum products - petrol, diesel, LPG and kerosene - to the state-owned oil marketing companies (OMCs) at Rs 73,500 crore for the full year at the then prevailing international crude prices. This was to be partly covered through oil bonds worth Rs 28,300 crore. However, with the softening of the crude prices, the under-recovery is now expected to not to exceed Rs 50,000 crore. "We will be able to meet the impact due to this reduction through oil bonds that have already been sanctioned. Oil bonds worth Rs 19,150 crore have already been sanctioned and the remaining would be enough to cover for this price reduction," he said.

Following the reduction, industry sources said the under-recovery on diesel will increase to Rs 2.30 per litre from Rs 1.30, while the profit, which the OMCs had started making on petrol of about Rs 2 per litre, would be neutralised. Indian Oil Corporation Ltd, with the largest market share in retail business among the public sector companies, would bear an additional burden of Rs 8 crore per day due to the price cut.

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