-The Times of India
State-run fuel retailers on Saturday reduced petrol price by Rs 1.68 per litre, excluding state taxes. This means consumers in Delhi would pay Rs 2 less per litre at pumps from midnight and will see an additional 92 paise reduction next week after the local government notifies a reduction in the value added tax (VAT).
In other states, the extent of decline would vary by a few paise due to different tax rates.
Compared to May 23, in Delhi, the increase would be of the order of 4.60 a litre (after incorporating the VAT impact) as against Rs 7.54 when the hike was announced last week.
The announcement of a cut comes two days after the May 31 nationwide strike observed by the opposition to protest against the steepest-ever increase in petrol price on May 24. Petrol price was jacked up by state fuel retailers by Rs 6.28 per litre, excluding taxes, or about 11%, citing the rupee's fall and rise in international oil prices in the first fortnight of May.
The move predictably sparked howls of protest from parties across political spectrum, including the Congress. Soon thereafter, the heads of oil marketing companies and the government held out hope of a cut on June 1, citing emerging price trends in Singapore bulk market for crude and gasoline — trade name for petrol.
That cut should have been announced on June 1 since oil marketers review prices on the 15th and last day of each month. The pump price of petrol is arrived at by calculating the average Singapore price of gasoline in the preceding fortnight and the rupee's exchange rate against the dollar.
Since the May 24 increase in the rate of petrol, gasoline price declined to $115.77 per barrel in the second fortnight of May from $124.37 in the first fortnight. Crude too declined to $106 a barrel in the second fortnight from $116 in the preceding period.
But the government asked the oil marketers to hold their horses with the aim of preventing the opposition from taking credit. A reduction from June 1, a day after the nationwide strike, could have been interpreted as the government's capitulation to opposition pressure.
Sources said the oil marketers were to give a few days' gap before reducing the price to avoid giving a political colour to a "commercial and economic decision". But the government suddenly decided to give the green signal on Saturday after it dawned that the rupee's continued fall against the dollar may not leave much room for a substantial reduction in the coming week, first reported by TOI on May 31.
The oil companies found that their average exchange rate continued to worsen as it declined to Rs 54.96 to a dollar in the second fortnight from Rs 53.17 in the first fortnight. Fuel prices need to be raised by 77 paise if the exchange rate falls by a rupee, while each dollar rise in crude price requires street prices to be raised by 33 paise.
No wonder, the first reduction in six months failed to impress the main opposition BJP. Party president Nitin Gadkari said they would continue to agitate on the streets till petrol price was brought back to the May 24 level.
The oil marketers had last reduced rates by Rs 0.78 per litre on December 1 and by Rs 2.22 a litre on November 16. The reductions followed Rs 1.80 per litre increase from November 4.
Delhi price cut from Rs 73.18 to Rs 71.16, will fall to Rs 70.24 next week after VAT reduction
Mumbai price cut by Rs 2.12 to Rs 76.45 per litre
Kolkata cut from Rs 77.88 to Rs 75.81 a litre
Chennai cut by Rs 2.13 to Rs 75.40 a litre