The state refiners could cut petrol prices by an approximate price of Re. 1 per litre (or 1.5 percent), as softening Singapore spot gasoline prices have offset the impact of a declining rupee, an industry source said on Monday.
The companies cut petrol prices by about 3.2 percent earlier this month, the first reduction in retail prices in nearly three years and the first since prices were decontrolled in June 2010.
As per current calculations, there is scope to cut the basic price of petrol by about 0.85 rupees a litre, including taxes it should be about one rupee. We have to see price movements in the next two days also before deciding the final impact, the official said, on condition of anonymity.
Refiners discuss prices every two weeks and so far in this fortnight, spot FOB gasoline prices in Singapore have averaged $108.76 a barrel compared with $114.13 in the previous fortnight, according to Reuters calculations.
Oil companies had earlier this month cut petrol prices, considering the rupee average at 49.30 to a dollar, an Indian Oil Corp. press release said. Since then, Reuters data shows the rupee has declined to an average 51.78.
India's three state-run fuel retailing giants - IOC, Hindustan Petroleum Corp. and Bharat Petroleum Corp. tend to move their prices in tandem.
Gasoline is nowhere near as widely used as diesel in India - accounting for around 10 percent of fuel demand compared with about 40 percent for diesel - but it is high-profile because it powers many of the cars owned by the growing middle class.
Gasoline has a 1.09 percent weighting in the inflation index and near double-digit consumer prices have provoked criticism of the government, which subsidises other fuels such as diesel and cooking gas.
The widening price gap between gasoline and diesel has slowed the growth of gasoline consumption, which has recently fallen behind that of diesel.