Home Minister P Chidambaram today told Parliament that the government would see if it was possible to cut prices of petrol and diesel further following lower global crude oil prices.
Chidambaram was speaking in Rajya Sabha after the government informed both houses of Parliament that the former finance minister would assist Prime Minister Manmohan Singh in the works of finance ministry during this Parliament session. Singh currently heads the finance ministry.
“We will watch petrol and diesel prices to see if further (price) cuts are possible,” Chidambaram said.
Cutting fuel prices will help lower the already sliding rate of inflation. Lower inflation rates will give the Reserve Bank of India room to cut interest rates in a bid to boost a slowing economy. Inflation for the week ended November 28 fell to 8 per cent from a high of over 13 per cent in August this year.
Sagging economies around the world have pulled down average oil prices by 9 per cent in the first fortnight of this month compared with the second fortnight of November. This has resulted in state-owned oil refiners’ such as Indian Oil Corporation (IOC) almost wiping out their losses from the fuel price cut of earlier this month.
The oil companies revise their under-realisations on petrol and diesel every fortnight and that on kerosene and cooking gas every month.
IOC, which supplies over half the fuels the country consumes, is currently losing around Rs 6 crore every day as they continue to sell kerosene and cooking gas at below production costs.
After the fuel price cut on December 5, IOC's daily losses went up to over Rs 12 crore from Rs 5 crore before the price reduction.
The company is currently making profits of Rs 11.48 on every litre of petrol they sell and Rs 2.92 on every litre of diesel. These two products account for 47 per cent of the total sales of these companies.
IOC, along with Bharat Petroleum and Hindustan Petroleum, are however still making losses on their kerosene and cooking gas sales. “The quantum of losses on these two products outstrip the gains from petrol and diesel,” said a senior IOC official.
Kerosene and cooking gas make up 16 per cent of the total sales of the oil companies.
Officials in these oil companies also say that if oil prices remain at around $40 per barrel over the next fortnight then they may break even on sales of kerosene and cooking gas. “The rupee is not depreciating further, and if oil prices are favourable, we may start making profits on all fuels sales,” said an official with Hindustan Petroleum, which supplies around a fourth of the country’s fuel demand.
The average value of the rupee appreciated by 1 per cent to 49.35 against the dollar in the first fortnight of this month compared with 49.85 in the last fortnight on November. An appreciating rupee against the US currency reduces the under-realisations of the oil companies as they pay for the crude oil in dollars.
