State-run fuel retailers are expected to announce a reduction of between Rs1.50 and Rs2 a litre in petrol price tomorrow (June 01, 2012). The cut, once announced, will come into effect from June 1. The cut will bring some succour to consumers from the steepest-ever increase — Rs6.28 a litre, excluding state
taxes — affected by the fuel retailers on May 23.
The oil companies had already factored in the reduction, given the trend in the Singapore bulk market for crude oil and gasoline — trade name for petrol. Petrol price in India is set in tune with a fortnight's average of Singapore prices and the rupee's exchange rate.
Oil marketing companies raised prices on the basis of gasoline price and rupee movement in the first fortnight of May. But the numbers have declined in the second fortnight. Crude has been averaging around $106 a barrel, down from $111 in the first fortnight, and gasoline around $116 against $124 in the preceding period.
The first official indication of an impending cut came a day after the hike when oil minister S Jaipal Reddy said the government would watch international oil prices and the rupee's movements against the dollar for 'a few days' before taking any decision to moderate the hike.
The rupee too has not moved dramatically against the dollar since petrol price was increased. Most of the hike was blamed on the rupee's drastic fall against dollar. Every Re1 fall in the currency's value against dollar adds around 77 paise to pump price, whereas every $1 rise in crude price push up fuel price by about 33 paise.
A day later, R S Butola, chairman of market leader Indian Oil Corporation, too said the retailers would pass on the benefit of the downward trend in bulk markets if there was no further 'drastic' fall in the rupee's value against dollar.
Along with the favourable numbers, the retailers are also under pressure from parent oil ministry. Within days of raising prices, the oil retailers posted fat annual profits purely on the back of cash subsidy received from the government and huge discounts from oil producers.
Though the profits were half of previous year, they have created a perception of profiteering at the cost of consumers and drawn the government into a sharper focus of popular anger.
A reduction, thus, will help the government to distance itself from the price increase and reinforce the idea that petrol is a deregulated product. It will also help pacify political opposition, particularly from within the Congress and allies such as Trinamool Congress.
....more info
taxes — affected by the fuel retailers on May 23.
The oil companies had already factored in the reduction, given the trend in the Singapore bulk market for crude oil and gasoline — trade name for petrol. Petrol price in India is set in tune with a fortnight's average of Singapore prices and the rupee's exchange rate.
Oil marketing companies raised prices on the basis of gasoline price and rupee movement in the first fortnight of May. But the numbers have declined in the second fortnight. Crude has been averaging around $106 a barrel, down from $111 in the first fortnight, and gasoline around $116 against $124 in the preceding period.
The first official indication of an impending cut came a day after the hike when oil minister S Jaipal Reddy said the government would watch international oil prices and the rupee's movements against the dollar for 'a few days' before taking any decision to moderate the hike.
The rupee too has not moved dramatically against the dollar since petrol price was increased. Most of the hike was blamed on the rupee's drastic fall against dollar. Every Re1 fall in the currency's value against dollar adds around 77 paise to pump price, whereas every $1 rise in crude price push up fuel price by about 33 paise.
A day later, R S Butola, chairman of market leader Indian Oil Corporation, too said the retailers would pass on the benefit of the downward trend in bulk markets if there was no further 'drastic' fall in the rupee's value against dollar.
Along with the favourable numbers, the retailers are also under pressure from parent oil ministry. Within days of raising prices, the oil retailers posted fat annual profits purely on the back of cash subsidy received from the government and huge discounts from oil producers.
Though the profits were half of previous year, they have created a perception of profiteering at the cost of consumers and drawn the government into a sharper focus of popular anger.
A reduction, thus, will help the government to distance itself from the price increase and reinforce the idea that petrol is a deregulated product. It will also help pacify political opposition, particularly from within the Congress and allies such as Trinamool Congress.
....more info