Govt cuts fuel prices as interim measure

After dilly-dallying for several days, the Government finally bowed to growing pressure from across the board and lowered the prices of petrol and diesel. Petrol prices were cut by Rs5 per litre while that of diesel were cut by Rs2 per litre. This was the first reduction in fuel prices since February 2007. However, the prices of cooking gas and kerosene were kept untouched. Also, there were no changes in taxes on petroleum products. The cuts will trim earnings for public sector oil refiners - IOC, HPCL and BPCL - which were just starting to enjoy profitability after years of mounting losses from selling heavily discounted fuel even as crude prices surged. At the same time, it will help reduce inflation further. Inflation has fallen from a 16-year high of almost 13% in early August to over 8%.

Public sector oil firms have seen margins turn positive from November after crude oil prices plunged from record high of US$147 per barrel to US$43 a barrel. But, the Government did not want to revise prices as the Model Code of Conduct for elections was in place that bars it from making any major policy announcement. Voting in Rajasthan ended on Thursday, bringing the curtains down on assembly elections in four major states - Delhi, Rajasthan, Madhya Pradesh and Chhattisgarh. Polling in Jammu & Kashmir - one of the six states that went to elections - would end on December 24.