The price changes announced by oil companies are excluding local sales tax or VAT and will be effective midnight tonight.
While petrol price cut has been made possible because of appreciation in rupee value against US dollar, diesel rates are being hiked as per the practice of increase in rates by small monthly doses to cover losses.
The petrol price in Delhi will be cut by Rs 3.66 to Rs 72.40 per litre, while it will cost Rs 79.49 per litre in Mumbai as against Rs 83.63 currently.
The cut in petrol price is the first reduction in rates since May. Petrol price was last cut on May 1 by Rs 3 per litre, the steepest reduction in rates in over five years.
Since June petrol prices have been raised seven times, totalling Rs 10.80 per litre, excluding VAT (Rs 13.06 after including state tax) as the rupee depreciated sharply against the rupee.
In a parallel move, diesel price was hiked by 50 paise, excluding VAT, in line with the January decision of the government allowing oil companies freedom to raise prices in small doses every month to wipe out mounting losses.
The diesel price in Delhi has been hiked by 57 paise to Rs 52.54 per litre while it would cost Rs 59.46 in Mumbai from Monday as compared to Rs 58.86 currently.
Today's hike in the ninth since the January 17 and most of the losses on diesel sales should have been wiped out by now to make the fuel market priced. But the fall in rupee, around 25 per cent since April, has worsened the situation and losses mounted to Rs 14.50 per litre.
However, the recent firming of rupee against US dollar has trimmed these losses to Rs 10.52. Diesel rates have risen by a cumulative Rs 5.39 this year.
Alongside, oil firms also raised rates of non-subsidised domestic cooking gas (LPG) that households buy after exhausting their quota of 9 subsidised or cheaper cylinder. Price in Delhi was hiked by Rs 71.50 per 14.2-kg cylinder to Rs 1004.
Petrol price was last revised on September 14 when rates went up by Rs 1.63 per litre to Rs 76.06 per litre in Delhi.
"The decrease in petrol prices has now become feasible because of reduction of motor spirit prices from about USD 117 per barrel to about USD 113 and appreciation of rupee against Dollar from about 66 to a dollar to about 63," said Indian Oil Corp (IOC)."Both these factors have resulted in the reduction of petrol prices which is being passed on to the consumer," itsaid in a statement.
IOC said the Government had on January 17 authorised oil marketing companies to increase the retail selling price of diesel within a small range every month until losses on the fuel are wiped out.
Since then, retail diesel prices are being revised every month and today the prices have been hiked by 50 paise. "Even after the current increase, under recovery (loss) on retail diesel shall stand at Rs 10.52 per litre," IOC said.
Besides diesel, oil firms are losing Rs 38.32 per litre on kerosene and Rs 532.50 per 14.2-kg domestic cooking gas (LPG) cylinder.
"For the year 2013-14, IOC is expected to incur under-recovery of Rs 73,500 crore on sale of these three sensitive products (industry: Rs 1,39,600 crore)," the statement said. The movement of prices in international oil market and rupee-dollar exchange rate was being closely monitored and developing trends of the market will be reflected in future price changes, IOC added.