The stage is all set for a reduction in the consumer prices of petrol and diesel. With the price of Indian basket of crude oil dropping to $48 a barrel levels, the government is planning to bring petrol and diesel prices back to their pre-June levels. Crude oil prices in global markets have also dropped to a low of $ 54. 42 for a barrel.
Hiking the excise duty on petrol and diesel by Rs one a litre each is also on cards. Deliberations in this regard are going on, sources said. Increasing the excise duty on petrol and diesel would go a long way in helping buoy excise duty collections which fell by 8.7% last month. The finance ministry is expected to lose Rs 6,600 crore this fiscal because of the excise duty cut on the two fuels. At that time it estimated to lose out nearly Rs 20,000 crore, which it collected from the Central taxes on oil and petroleum products in 2007-08.
Sources told FE that following a substantial drop in international crude oil prices along with strong political pressures from within the Congress and the opposition, a price cut ranging between Rs 3 to 5 a litre is being considered and an announcement can be expected by the month end. It is expected that a decision to this effect may be taken after December 24, following elections in six states.
Besides, the public sector oil marketing companies have started making profits on sales of petrol and diesel by close to Rs 10 a litre and Rs one a litre respectively, which strengthens the case for a cut in the prices of the two fuels.
The reduction will also help the government move closer to the targets set by its on the inflation side (RBI?s target of 7 % by March 2009), thereby boosting the decelerating economic growth.
In June this year, the government had raised diesel price by Rs 3 and petrol price by Rs 5 on the grounds that crude prices had touched $147 a barrel. Global crude prices are currently hovering at $55 a barrel.