Petrol prices slashed by Rs 5, diesel by Rs 2

Petrol and diesel prices slashed:

In order to usher a feel-good factor dovetailed with the fiscal impetus package to be announced on Saturday, the UPA Government has decided to cut the price of petrol by Rs 5 per litre and diesel by Rs 2 per litre from Saturday, leaving cooking gas LPG unchanged."The cuts were decided in principle today after consulting Prime Minister Manmohan Singh and Congress chairperson Sonia Gandhi. It has the approval of former Finance Minister P Chidambaram whom Petroleum Minister Murli Deora met Wednesday night," said our sources.

The respite would put extra money into people's pockets so that the net income effect could spur demand in a slowing economy. It would also reduce the inflationary pressure on the wholesale price index where Fuel, Power, Light & Lubricants Group has a weight of 14.23 percent. Since September, crude Oil prices have started sliding and are now at 2005 levels of $44 but the government could not revise prices downwards as the Model Code of Conduct for elections bars it from making any announcement that could be seen as appeasing voters. State-run oil marketing companies started earning extra returns from November with current month profit on petrol at Rs 14.89 a litre and on diesel at Rs 3.03 per litre. However, the three OMCs continue to lose Rs 17.26 per litre on kerosene and Rs 148.32 on a cylinder of LPG.

In June, the government raised the price of petrol by Rs 5 per litre, diesel by Rs 3 per litre and domestic LPG by Rs 50 per cylinder due to the high international prices of crude oil which touched a peak of $147 a barrel mid-July.