Sources in the petroleum ministry said petrol and diesel prices might be cut by Re 1 each, but there were indications of a steeper reduction of up to Rs 2 a litre. The current price of petrol in Delhi is Rs 46.85 a litre and that of diesel is Rs 32.25 a litre.
After meeting Prime Minister Manmohan Singh on Monday, Deora had a second round of discussions with him on Tuesday evening to finalise the exact price-cuts and their impact on the books of state-owned oil marketing companies.
Earlier in the day, UPA chairperson and Congress president Sonia Gandhi said she had discussed the issue of fuel price cuts with the Prime Minister, who in turn assured her that he would look into the matter. Addressing the Congress general body meeting, she said the sharp rise in fuel prices had caused considerable hardship to the people.
At the current levels of $56-58 a barrel for the Indian crude oil basket, Indian Oil, HPCL, BPCL and IBP make a profit of Rs 4.68 a litre on petrol. But on diesel, they still incur a marginal 41 paise-a-litre loss.
A ministry official said the margin on petrol was sufficient to effect a reduction of Re 1 or slightly more in the prices of both petrol and diesel.
After a sharp 36% fall in international crude oil prices in the last two months, the government has been under pressure from its Left allies to pare petrol and diesel prices. Private refiner Reliance Industries, which was retailing petrol and diesel at a price higher than that of oil PSUs, has reduced fuel prices thrice in the last 45 days.
The Indian basket (which represents the average price of Oman and Dubai sour crude and Brent sweet crude in a ratio of 58:42), touched a record high of $75.20 a barrel on August 8, and fell to $55.29 on October 31.
Even at current levels, oil marketing PSUs are incurring losses on the sale of diesel, PDS kerosene and domestic LPG. In November so far, under-realisation on diesel topped Rs 330 crore, on kerosene Rs 1,330 crore, and on LPG Rs 790 crore.