The reduction in rates follows a Rs 2.02 a litre cut in prices from June 3. The two price cuts have wiped out more than half of the massive Rs 7.54 per litre increase in rates, the biggest in the history, effected last month. Even after today's reduction, there exists a scope for cutting rates by a further Re 1 per litre as current revision was done at average international oil rate in the first fortnight of June.
Global oil prices have fallen by 8 per cent since then. In Mumbai, petrol price has been cut by Rs 3.10 to Rs 73.35 per litre, while it will cost Rs 72.74 a litre in Kolkata from tomorrow compared to Rs 75.81 per litre currently. Chennai saw a Rs 3.07 per litre cut in price to Rs 72.74 a litre.
State-owned oil firms abandoned the practice of revising rates of petrol on 1st and 16th of every month and from now on will now do so on a random date so as to deter petrol pump dealers building positions. Petrol pumps at some places run dry as owners stop taking supplies from companies if a reduction in price is anticipated. Similarly, if an increase in rate is expected, pump dealers start hoarding supplies.
Indian Oil Corp, the nation's largest fuel retailer, said the three oil firms are projected to lose a record Rs 151,000 crore in revenue on sale of diesel, domestic LPG and kerosene, whose rates have not been revised in past one year.
Sources said current revision in petrol price was done keeping in mind an average of USD 106.93 per barrel international rate for gasoline, against which domestic petrol prices are benchmarked. Gasoline rates have since fallen to about $97-98 a barrel.
But value of rupee against the US dollar has been a big dampener. Rupee has devalued to Rs 57 to a US dollar from Rs 54.96 to a US dollar (average of first fortnight of June), making imports costlier. "We can sustain these prices for a sometime (without changing retail selling price). Unless there is a further drop in oil prices and rupee strengthens, a revision in petrol rates looks extremely unlikely in coming days," a source said. IOC said the company had lost Rs 1,053 crore during current fiscal on not being able to raise petrol rates in line with the cost in the first two months of current fiscal.
For industry (IOC plus Bharat Petroleum and Hindustan Petroleum) the loss comes to Rs 2,323 crore on a commodity whose pricing was freed by the government in June 2010. "In addition, oil marketing companies are suffering high level of revenue losses on the three sensitive petroleum products, namely diesel, kerosene and cooking gas (LPG)," IOC said in a statement here.
Since the last revision in prices in June 2011, revenue loss on diesel has gone up from Rs 6.13 per litre to Rs 10.20 per litre, for kerosene (PDS) from Rs 24.16 per litre to Rs 30.53 per litre and for LPG from Rs 331.13 per cylinder to Rs 396.00 per cylinder. "At these rates, it is estimated that under-recovery (or revenue loss) on sale of sensitive products during 2012-13 shall be around Rs 83,000 crore (for IOC) and Rs 1,51,000 crore for the industry," it added.
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