Oil companies cut petrol and diesel prices by Rs 2.41 and Rs 2.25 a litre respectively with immediate effect on plunging global crude oil costs, a move that will aid government’s efforts to keep inflation low and stable.
Lower inflation, in turn, could prompt the RBI to cut interest rates and nudge banks to lower home loan EMIs.
Since August, petrol has turned cheaper by Rs 9.36 a litre in six price cuts, while diesel prices have been cut twice by Rs 5.62 a litre in less than 15 days.
The latest diesel price cut follows the Rs 3.37 a litre reduction on October 18, when in a reformist move, the government lifted state controls on diesel prices, allowing oil companies to fix the fuel’s pump-gate prices based on global crude oil costs.
Petrol will cost Rs 64.25 a litre in Delhi and Rs 71.91 in Mumbai. Diesel, which is India’s most consumed fuel, will now cost Rs 53.35 per litre in Delhi and Rs 61.04 in Mumbai.
Prices vary between states due to local levies. India imports two-thirds of its energy need, making oil prices a key factor for inflation.
India’s wholesale inflation rate plunged to 2.38% in September, the lowest in five years, while retail inflation fell to 6.46%, the lowest since 2012.
The cut in prices of diesel will bolster the government’s plans to tame inflation and cut subsidies.
A lower subsidy bill will eventually help govt cut taxes on petro products. This, in turn, will help offset shocks when global crude prices shoot up.
Price of non-subsidised cooking gas (LPG) was also cut by Rs 18.5 to Rs 865 per 14.2-kg cylinder, the fourth reduction since August of the commodity bought by users after exhausting their quota of sub-market priced domestic cooking gas.