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Published: December 29, 2023
Updated: December 29, 2023

Government Announcement of Fuel Price Reductions likely soon : Relief for Consumers on the Horizon

In a bid to alleviate the economic burden on citizens, the Indian government is contemplating a significant reduction in petrol and diesel prices, sources revealed to Business Today. The potential decrease is poised to range between Rs 4 and Rs 6 per litre, with discussions hinting at a more substantial cut of up to Rs 10 per litre.

Government's Deliberations:

Recent discussions between the Petroleum Ministry and the Finance Ministry have paved the way for potential relief measures. Options have been submitted to the Prime Minister's Office, emphasizing the collaborative effort between the government and Oil Marketing Companies (OMCs) to share the burden of the price cut equally.

Potential for Higher Cuts:

While the primary consideration is a moderate reduction, there's speculation about a more significant cut of up to Rs 10 per litre. This move not only aims at easing the financial strain on the public but also addresses concerns about rising retail inflation, which reached a three-month high of 5.55% in November.

Government's Stance and Rationale:

Favouring a reduction, the Union government points to the stable crude oil prices in the range of $70-$80 per barrel over the last three months. The Central government has previously slashed Central Excise duty by Rs 13 per litre on petrol and Rs 16 per litre on diesel in two tranches in November 2021 and May 2022. These reductions were fully passed on to consumers, resulting in lower retail prices.

Impact on Inflation and Oil Companies:

Apart from providing relief to consumers, a fuel price cut is expected to mitigate the impact of the recent surge in retail inflation. It is noteworthy that lower crude oil prices have contributed to substantial profits for government-run oil marketing companies – Indian Oil Corp (IOC), Bharat Petroleum Corp (BPCL), and Hindustan Petroleum Corp (HPCL) – in the current fiscal year.

Global Context:

While global oil prices hover around $80 a barrel, concerns over higher inventories and record output in the United States add complexity to the decision-making process.

As the government contemplates these price reductions in anticipation of general elections in the first half of 2024, the potential relief for consumers and its impact on inflation mark significant developments will be monitored in days to come.