Petrol price cut by 78p, but hike likely
Chennai   01-Dec-2011

For the second time in as many weeks, state-run oil companies on Wednesday reduced petrol price by 65 paise a litre. Taking the incremental impact of state taxes, the fuel will become cheaper by 78 paise in Delhi and will vary by a few paise in other states.

But the reduction came with a warning that the price may swing back next fortnight as the recent downward trend in the fuel’s bulk market showed signs of a reversal and the rupee continues to remain weak against the dollar. The latest round of reduction is also the second since January. Petrol price was reduced for the first time on November 16 when it was slashed by over Rs 2 per litre.

Together, the two cuts are expected to lower the motoring bill of an average family driving a small car by about Rs 300-350 per month, assuming a mileage of 18 km to a litre and a daily run of 60 km in a city like Delhi.

“We have an established formula which showed an over-recovery of 65 paise on paper. We decided to pass on the benefit keeping in mind consumer interest. But actually we (refineries) are making losses since gasoline (motor spirit or petrol in bulk markets) price has fallen below crude,” R S Butola, chairman of market leader IndianOil, told ToI. He said both crude and petrol’s bulk rates have averaged $109 a barrel last fortnight. “Considering that we get only 0.9% petrol from a barrel of crude, we need to sell the fuel at $121 per barrel to be profitable,” Butola said.

Butola said the oil marketers continued to face pressure on the exchange rate front, with the rupee averaging 51.50 to a dollar in the fortnight under review against 49.32 in the preceding fortnight. But this was offset marginally by the drop in petrol’s bulk price to $109 per barrel from $114 in the corresponding periods, respectively.