--Retailers to cut gasoline prices with effect from Sunday
--Decline in international prices help, but rupee decline vs dollar takes away benefit
(Adds comments from Indian Oil Corp., background.)
By Rakesh Sharma and Raghavendra Upadhyaya
India's state fuel retailers Saturday decided to cut retail gasoline prices by INR2.02 (3.6 cents) a liter, with effect from Sunday, Indian Oil Corp. (530965.BY) said in a statement.
The cut in prices follows a steep increase in gasoline prices in May, which drew heated protests from the ruling Congress party's key allies, opposition parties and consumers.
The 11.5% increase in gasoline prices on May 24 was the first in six months for the three retailers: Bharat Petroleum Corp. (500547.BY), Hindustan Petroleum Corp. (500104.BY) and Indian Oil.
This increase had taken the gasoline price to INR73.18 a liter at New Delhi retail fuel outlets. The rates vary across India due to local taxes.
"Since the last pricing cycle, though international oil prices have decreased quite significantly, the USD-INR exchange rate has shown further deterioration," said Indian Oil in its statement to explain the decision for a partial rollback in gasoline prices.
The price cut may also help revive demand for gasoline-powered cars, which make up for almost half of the total passenger vehicle sales in India. Major auto makers in India posted a decline or a marginal growth in passenger vehicle sales in May as continued weak demand for gasoline models outweighed rising sales of diesel vehicles.
The average Indian crude basket price declined $105.57 a barrel for the two weeks ended May 31 from $111.55 a barrel in the 15-day period that ended May 15, the government data showed.
The Indian rupee however depreciated against the dollar and is now around INR55.57 to a dollar. The rupee has depreciated almost 9% against the dollar since the end of April.
The three retailers have freedom to revise gasoline rates every two weeks, in line with the benchmark global prices. But the unpalatable decision of price increases had been rocked by protests.
In the year ended March 31, the fuel retailers raised gasoline prices only thrice and cut rates twice. The companies had to absorb losses worth INR46.51 billion on gasoline sales as they couldn't revise rates after Dec. 1, in line with benchmark international prices.
The gasoline price increase has upset household budgets of consumers who are already reeling due to high inflation. Government data earlier this month showed inflation in April accelerated to 7.23% from a year earlier, compared with 6.89% in March, as food prices rose.
The government continues to keep tight control over diesel, kerosene and cooking gas rates, on which the fuel retailers are daily losing INR5.09 billion. Oil Minister Jaipal Reddy has said he won't touch the prices of the three products.
The government compensates retailers for revenue losses suffered on sales of diesel and cooking fuels through direct cash subsidy.
-By Rakesh Sharma and Raghavendra Upadhyaya, Dow Jones Newswires; 91 22 61456103; [email protected]