New Delhi, Nov 28: Petrol and diesel prices may go below Rs 60 as global oil prices dived to 4-year lows of $70 per barrel on Thursday after Organization of the Petroleum Exporting Countries (OPEC) decided against cutting back production.
This will affect the economy of India in a big way as it imports two-thirds of its oil requirements. As a result of the cut, companies' import bills also go down, which will help them to cut down the retail prices of petrol and diesel.
Domestic oil industry sources say that the cuts may go down below Rs 60 a litre in the coming weeks, if the slide continues to follow the predicted pattern. If this turns out to be true, the government will be able to keep inflation low and stable.
Earlier, India's retail inflation fell to a three-year low of 5.52% in October, while the wholesale inflation plunged to 1.77%, which is a five-year low. This led to a sharp drop in the prices of vegetables and petrol prices.
Oil company owners say."If the slide in oil prices continues, we can expect petrol prices to drop below Rs. 60 a litre from around Rs. 65 presently (in Delhi)."
In a 5-hr meeting in Vienna, the OPEC decided that they would not hold back production, despite 30% reduction in oil prices since June.
Softer crude prices will also help the government to curb inflation and curtail fuel subsidies. A lower subsidy bill will help contain fiscal deficit - a measure of the amount the government borrows to fund its expenses - at the budgeted level of 4.1% of GDP in 2014-15.
India is the fourt largest importer of crude oil, which accounts for $145 billion, or more than a third of its total import bill. With every dollar decrease in oil prices, the government's oil import bill comes down by Rs. 4,000 crore.