New Delhi Feb. 12

To enable a reduction in fuel prices and contain inflation, the Petroleum Ministry has sought a Re 1 per litre excise duty cut on diesel. The Petroleum Minister, Mr Murli Deora, has written to the Finance Minister, Mr P. Chidambaram, asking for the rationalisation of duties on petroleum products - petrol and diesel.

If the request of the Petroleum Ministry is acceded to, then the Government could consider a cut in petrol price by Rs 2 per litre and that of diesel by Re 1 per litre. The rise in international oil prices this month has seen a decline in profits on sale of diesel. "There is a loss on diesel sale, leaving no scope of price reduction unless the Government decides to cut excise duty,'' official sources said.

For the second fortnight of January, the state-owned marketing companies are suffering under recovery of 26 paise per litre on diesel. This is the most consumed auto fuel and the under recoveries are expected to go up with hardening of crude and product prices.

The northward movement in international crude prices, which has seen Indian crude basket rise from $51.74 a barrel in the second fortnight of January to $56.18 currently, is also expected to reduce the profit made on petrol. On February 9, the Indian crude basket stood at $56.93 a barrel.

Based on the current level of prices, the annual under recoveries for 2006-07 on all four petroleum products are likely to be Rs 50,000 crore out of which Rs 29,000 crore is for kerosene and LPG alone.

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