Petrol and diesel prices Thursday were reduced for the first time in over two months because of a drop in the cost of production, according to state-owned oil firms. Petrol price was cut by 21 paise per litre and diesel by 11 paise, a price notification issued by state retailers said. This is the first price cut arising from a drop in international oil prices. The rates were reduced by a minimum Rs 2.50 per litre across the country on October 5, when the government cut excise duty on petrol and diesel by Rs 1.50 a litre and asked oil PSUs to subsidise the fuels by another Re 1 a litre. The reduction in BJP-ruled states was more as they matched this cut by an equivalent reduction in local sales tax or VAT. Petrol in Delhi now costs Rs 82.62 per litre as against Rs 82.83 a litre previously. A litre of diesel now costs Rs 75.58 as compared to Rs 75.69 previously. In Mumbai, petrol now costs Rs 88.08 per litre and diesel Rs 79.24.
The price cut follows international oil prices trading near the lowest level in a month on a bigger-than-expected gain in American stockpiles. West Texas Intermediate for November delivery traded 11 cents lower at USD 69.64 a barrel on the New York Mercantile Exchange, while Brent for December settlement was at USD 79.89 a barrel on the London-based ICE Futures Europe exchange. Brent had earlier this month hit a four-year high of USD 86.74 a barrel. Prior to Thursday's cut in rates, diesel price had risen by Rs 2.74 per litre since October 5 to more than wipe away the excise duty cut and oil firm subsidy. Petrol price had during this period risen by Rs 1.33 a litre. Before the October 5 price cut, petrol in Delhi had hit an all-time high of Rs 84 per litre and diesel was at record Rs 75.45. This came down to Rs 81.50 per litre for petrol and Rs 72.95 in case of diesel.
In Mumbai, petrol had hit a peak of Rs 91.34 hit on October 4 and diesel was sold at a record high of Rs 80.10. After the Centre cut excise duty by Rs 1.50 per litre and asked PSU oil firms to subsidise fuel by Re 1, Maharashtra and Gujarat governments were among the first to announce a matching Rs 2.50 cut. They were later joined by Chhattisgarh, Jharkhand, Tripura, Uttar Pradesh, Madhya Pradesh, Himachal Pradesh, Haryana, Assam, Uttarakhand, Goa, Arunachal Pradesh and Bihar with similar moves. Jammu and Kashmir, which is under the governor's rule, too reduced the tax on the two fuel. Maharashtra, however, reduced VAT only on petrol and not on diesel. Even before the excise duty cut, Rajasthan, West Bengal, Karnataka, Kerala and Andhra Pradesh had last month reduced VAT to cushion consumers for a spate of price increases.
The reduction in excise duty on October 5, only the second in four years of BJP-led NDA rule, will dent Central government revenues by Rs 10,500 crore and was aimed at cooling retail prices that had shot up to an all-time high. The BJP-government at the centre had raised excise duty on petrol by Rs 11.77 a litre and that on diesel by Rs 13.47 a litre in nine instalments between November 2014 and January 2016 to shore up finances as global oil prices fell, but then cut the tax just once in October last year by Rs 2 a litre. Prior to October 5 cut, petrol price had risen by Rs 6.86 a litre and diesel by Rs 6.73 since mid-August.