The Government today swung into action to tame the rising inflation rate, which stands at a new two-year high.

Close on the heels RBIs cash reserve ration hike of 50 basis points, the Government reduced the fuel prices. While petrol rates have been cut by Rs 2, diesel will cost Re 1 less.

The government says that the fuel price cut burden is to be met by the oil companies as well as via bonds. The Oil Ministry however has stated that oil companies’ FY07 revenue loss should not exceed Rs 50,000 crore. It has also said that the Finance Ministry is likely to reduce duty on petroleum products soon.

The Ministry estimates that with this announcement, revenue loss on diesel sale for oil companies could rise to Rs 2.30/l from Rs 1.30/l. According to him, the underrecoveries stand at much lower levels as compared to June.

 

The price cuts will take effect from midnight today.

Prices of petrol and diesel at the four metros: