Petrol in Delhi will cost Rs 56.49 a litre from the midnight of February 3 and February 4 as compared to Rs 58.91 until now. Similarly, diesel will cost Rs 46.01 per litre as against Rs 48.26 at present.
This is the tenth straight reduction in petrol price since August and sixth in diesel since October.
Even after the price reduction, state fuel retailers are making a margin of Rs 4 a litre on petrol and about Rs 3.6 per litre on diesel which they want to use for recouping inventory losses.
Oil firms buy crude oil at one price but by the time it is processed and turned into fuel – a process that may take up to six weeks, a fall in international rates results in inventory loss, sources said.
Despite reductions, petrol will cost more than aviation turbine fuel (ATF), which is of superior quality and used in aircraft. A litre of jet fuel or ATF costs Rs 46.51 per litre in Delhi.
New rates of petrol and diesel will be effective from the midnight of February 3 and February 4, Indian Oil Corp (IOC) announced here.
After the price cuts, petrol price is the lowest since September 2010 while diesel is cheapest since March 2013.
ATF has a higher octane than petrol and diesel is a heavier fraction in the distillation process. Traditionally, auto fuels being of lesser quality than ATF would cost less.
Four consecutive excise duty hikes since November, totaling Rs 7.75 a litre on petrol and Rs 7.50 on diesel, have, however, reversed this.
But for these, the cumulative reduction of Rs 17.11 per litre in petrol price in ten cuts since August and Rs 12.96 a litre on diesel since its deregulation in October, would have been higher.
Petrol and diesel prices were last cut on January 17 by Rs 2.42 and Rs 2.25 a litre respectively.
“Since that price revision, international prices of both petrol and diesel have continued to be on a downtrend and the rupee-US dollar exchange rate has appreciated. The combined impact of both these factors warrant a decrease in retail selling prices of both petrol and diesel,” Indian Oil said.
“The movement of prices in international oil market and rupee-dollar exchange rate shall continue to be closely monitored and developing trends of the market will be reflected in future price changes,” the country’s largest fuel retailer said.
The government had last raised the excise duty on petrol and diesel by Rs 2 per litre each on January 17. Before this, the tax was hiked by Rs 1.50 a litre each on November 12. Prior to that excise was hiked by Rs 2.25 per litre on petrol and Rs 1 on diesel on December 2 and Rs 2 each on January 2.
Global crude oil prices have fallen almost 50 per cent since June 2014, the most since the 2008 financial crisis, as supplies swelled.
The crude oil that is being processed in refineries is one that was bought about 6-8 weeks ago when rates were higher than present prices. By the time, it is processed and marketed its market value would have come down, resulting in inventory losses, totaling about Rs 12,000 crore.