Retailers May Cut Petrol Price Next Week

State-run retailers may cut gasoline prices from Nov. 16, an industry source said. It will be the first cut in nearly three years and the first in the 18 months since the government liberalized it. The cut could be for at least 0.60 rupees a litre, or about 1 percent, the source said added.

Softening Singapore prices have partially offset the impact of a declining rupee to offer a small window of opportunity for a cut. Price increases have been unrelenting hikes since the government freed sales in June 2010, sparking political and public outcry.

If the rupee continues at current levels and if Singapore FOB (free on board) gasoline spot prices continue to average $115.80 a barrel, oil companies may reduce basic prices by at least 60 paise a litre, the source, who requested anonymity, told Reuters.

Last week, state-run Indian oil retailers raised gasoline prices by 1.50 rupees a litre, which rose to 1.80 rupees a litre after adding local taxes in Delhi. It was the fourth increase in gasoline prices this year and came as inflation continues near double digits. Indian petrol prices have not been cut since January 2009. Until June 2010 they were fixed by the government, which still controls other fuel costs.

Petrol 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 and vociferous middle class. In addition, many Indians use petrol-driven scooters for commuting, and families of four, all on a bike are a common sight.

The widening price gap between the two fuels has softened growth of petrol consumption, which has recently slowed behind that of diesel. Petrol currently retails for around 68.6 rupees ($1.37) per litre, nearly 68 percent higher than diesel. Last week's price rise was based on assumptions of Asian gasoline prices of about $121 a barrel and an exchange rate of 49.20 rupees to the dollar.

Spot Singapore gasoline prices are currently averaging $115.80 a barrel, according to Reuters data, while the rupee averaged about 49.30 to the dollar in the fortnight to Friday.

Indian fuel retailers usually meet once a fortnight to consider petrol prices but prefer to wait for a considerable change before passing it on to the retail level. Their profitability has been hurt as the government held back on raising prices of subsidised fuels-- gasoil, kerosene, and cooking gas - since June despite rising global crude oil prices . The oil firms are likely to suffer a revenue loss of 1.32 trillion rupees on their sales of subsidised fuels in the current fiscal year ending March 31, 2012.

The finance ministry on Friday agreed to give a cash compensation of 150 billion rupees to state fuel retailers to partially compensate them for losses on sale of subsidised fuels in July-September, two finance ministry sources said.

Indian Oil Corp, the country's biggest fuel retailer, last week reported its largest ever net loss of 74.86 billion rupees in the July to September period. The other two state-run retailers, Bharat Petroleum and Hindustan Petroleum, also reported losses during the quarter.