Petrol prices cut by up to Rs. 2 across India from midnight June 2

Owners of petrol cars can heave a very tiny sigh of relief. Oil companies have agreed to reduce petrol prices by up to Rs. 1.68 a litre across India, excluding taxes (VAT). This cut is effective midnight of June 2.

That means in states like Delhi, where the government had already decided to cut VAT by up to 20%, the effective cut is up to Rs. 2 per litre. Last Monday, petrol prices in Delhi were reduced to Rs. 71.92 per litre from Rs. 73.14 after a cut in VAT. Petrol prices in Delhi will now be about Rs. 71.18 per litre.

On May 24, petrol prices were hiked steeply by Rs. 7.50 a litre with oil companies citing a falling rupee badly affecting their margins and increasing losses. However, the sudden spurt in prices caught the common man by surprise, triggering protests nationwide by the Opposition and other groups. State governments provided some relief this week by slashing VAT on petrol, allowing prices to be reduced by up to Rs. 1.50 per litre.

Oil companies have relented because even though the rupee continues to depreciate vis-à-vis the dollar, international crude oil prices have been falling. It is likely to slip even further to under $100 a barrel soon according to forecasts by Citigroup, because of increased US oil production. Oil prices have cooled to $115 a barrel from $124 last week.

No hike in diesel price yet

Diesel car owners have nothing to worry about for the moment, as the petroleum ministry has ruled out hiking diesel, kerosene and LPG prices for the moment. An empowered group of ministers needs to meet to come to a consensus to reduce diesel prices.

How does this cut in prices affect you?

If you are an owner of a petrol car and have not filled up petrol since before May 24, 2012, your effective price increase in a city like Delhi is about Rs. 5.50 per litre after the reduction that is effective from June 2 midnight. That’s still a steep hike, but not as much as the Rs. 7.50 per litre increase that took place last week.

If you are a looking for a new car and want to check out whether a diesel or petrol car makes sense for you, use our Diesel Decider to help you make your decision.