New Delhi, Apr 2 (PTI): Petrol price was today cut by 85 paise per litre with effect from midnight tonight, the second reduction in rates in two weeks. he price cut, which was made possible because of fall in international oil prices, is excluding local sales tax or VAT.
After including VAT, the reduction in price of petrol in Delhi comes to Rs 1.02 per litre and the fuel will cost Rs 67.29 per litre from midnight tonight against Rs 68.34.
The price cut comes on back of the Rs 2 a litre reduction in rates effected on March 16. This was the steepest cut in rates in nine months which after including VAT resulted in a reduction of Rs 2.40 a litre in rates.
Petrol in Mumbai will cost Rs 1.07 less at Rs 74.14 per litre. In Kolkata, the price has been cut by an equal measure to Rs 74.72. It will cost Rs 70.34 a litre in Chennai from tomorrow against Rs 71.42 currently.
Announcing the reduction, Indian Oil Corp (IOC), the nation's largest fuel retailer, said since the last price change international prices of petrol have declined from USD 122.74 per barrel to USD 119.23 a barrel.
Also, the rupee-US dollar exchange rate has marginally declined from Rs 54.40 to a US dollar to Rs 54.28. Following this, it has been decided to pass on the benefit to customers and accordingly the aforesaid reduction in the retail selling price of petrol is being effected," it said in a statement.
Oil firms calculate the desired retail price on 1st and 16th of every month based on average imported oil price on the previous fortnight. The price change was to have been announced yesterday but it was deferred because of March 31 being Sunday.
The cut in petrol price follows two rounds of hike in rates since February. Petrol price was hiked by Rs 1.50 a litre on February 16 and then by Rs 1.40 per litre from March 2. Both the increases were excluding local VAT.
Though petrol price had been deregulated in June 2010, they have rarely moved in tandem with cost. This resulted in Rs 500 crore loss to IOC (Rs 1,150 crore loss to state fuel retailers) during 2012-13.
However, since January, when the government decided to cut subsidises by asking oil firms to moderate prices in step with cost, petrol prices have moved in sink with cost.
Diesel prices continue to be regulated, but the government had in January authorised oil firms to hike their rates by 40-50 paise per litre every month till such time that the entire revenue loss on the fuel is completely wiped off.
Oil firms raised diesel prices by 50-51 paise per litre on three occasions since then.
IOC said in addition to losses on sale of petrol, oil firms are suffering under-recovery (revenue loss) on sale of diesel of Rs 6.52, kerosene of Rs 30.49 per litre and domestic LPG of Rs 434.50 per cylinder.
"The movement in international oil prices and rupee-USD exchange rate is being monitored and decision on future price changes shall be taken accordingly," the statement said.