New Delhi: India cut fuel prices by up to 11% on Wednesday, its second reduction in nearly two months, as crude’s $100 fall since last July gave the government a chance to pass on the benefit to consumers ahead of elections.
India’s cuts followed those of Asian peer China, which in mid-January reduced prices to reflect changes in global crude rates and unveiled measures to promote fuel efficiency.
“Under the present circumstances, it has been decided to reduce the prices of petrol... and diesel,” Pranab Mukherjee, who is standing in as finance minister, told reporters after a cabinet meeting.
The price of petrol was lowered by Rs5 per litre, or 11%, from Rs45.62 in New Delhi, while diesel will be Rs2, or 6%, cheaper from the current retail price of Rs32.86 in the nation’s capital.
Oil minister Murli Deora said the cuts would become effective midnight.
Deora said no decision had been taken on deregulating fuel prices or changing the tax structure for the sector.
A government official had earlier said ministers were likely to end price controls on transport fuels and allow firms to set market-determined prices.
On 1 January, China raised the consumption tax on fuel oil sevenfold as part of a wider tax and fuel-pricing reform intended to encourage fuel efficiency and bring local prices more in tandem with international rates.
India trimmed diesel prices by 6% and gasoline rates by 10% in early December, the first reduction in two years, after crude oil plunged from its July peak above $147.
General elections must be held by May, with a coalition headed by the Congress party pitted against its principal opposition led by the Bharatiya Janata Party and a host of smaller parties.
Lower oil prices in a slowing economy have helped India’s inflation rate drop to 5.6% after it galloped to a 13-year high of nearly 13% in August.
US crude was up 0.32% at $41.90 a barrel at 17:39 GMT, rebounding from a 9% fall a day earlier, when bleak economic data from the United States, the top energy consumer, stirred demand concerns.
Crude oil prices have fallen as the global economic crisis has weakened demand, especially in developed economies.
India’s economy has braked sharply in recent months, cutting demand for oil products, and GDP expansion in the fiscal year to March-end is expected to moderate to 7% from 9% levels in each of the past three years.
Oil demand in Asia’s third largest consumer is likely to have slowed down in January because of a strike by millions of truckers, while dealers would have trimmed inventories anticipating the cut in fuel prices.