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Govt may slash fuel rates on Thursday

The government may on Thursday cut petrol, diesel and domestic LPG prices, besides freeing fuel pricing from administrative control.

business Updated: Jan 13, 2009 11:51 IST

The government may on Thursday cut petrol, diesel and domestic LPG prices, besides freeing fuel pricing from administrative control, a petroleum ministry official said on Tuesday.

The Cabinet, scheduled to meet on Thursday, may reduce petrol price by Rs 5 a litre, diesel by Rs 3 per litre and domestic LPG by Rs 25 per cylinder, giving relief to the common man and further easing inflationary pressures, he said.

State run oil companies are currently making Rs 9.70 a litre profit on sale of petrol, Rs 3.70 a litre on diesel, but are loosing Rs 31.70 per LPG cylinder and Rs 11.69 on every litre of kerosene.

"There is also a proposal for freeing the retail fuel prices from administrative control after a mechanism to compensate for the losses on LPG and kerosene is devised," he said.

The government will mop up additional revenues by increasing excise duty on petrol and diesel by a minimum of Rs one per litre.

For losses on LPG and kerosene, the Cabinet may decide on issuing a Rs 30,000 crore additional oil bonds this fiscal.

Petrol and diesel prices were cut only in December by Rs 5 a litre and Rs 2 per litre, respectively, as global crude prices fell to four year lows.

International oil prices have been hovering at that level for a while and have prompted the government to think of another round of price reduction.