The government on Thursday announced slashing petrol and diesel prices by Rs two and Re one per litre, respectively, with effect from Thursday midnight - as part of measures to tame soaring inflation.
The reduction, the second in less than three months, was decided at a meeting that Prime Manmohan Singh had with Finance Minister P Chidambaram and Petroleum Minister Murli Deora.
Inflation, which has become a cause for concern for the government, galloped further to 6.73 per cent for the week ended February 3 from 6.58 per cent the previous week.
Announcing the price cut, Deora said the decision follows concerns expressed by UPA Chairperson Sonia Gandhi about rising inflation.
On account of the cut, state-owned oil companies' losses on sale of diesel would increase to Rs 2.30 per litre from the present Rs 1.30 a litre. Oil companies, which were hitherto earning a profit of Rs two per litre on petrol, would be breaking even following the reduction.
In the national capital, retail selling price of petrol post-reduction would be Rs 42.85 a litre and diesel Rs 30.25 a litre.
The Finance Ministry is also likely to make duty adjustments, possibly cut excise rates, and an announcement in this regard is expected later on Thursday.
The two key motor fuel prices were last reduced by an identical amount in November.