Govt cuts fuel prices to control inflation

New Delhi, Feb 15 (UNI) In a significant step to check runaway inflation the Government today decided to reduce the price of petrol by two rupees per litre and diesel by rupee one per litre with effect from midnight.

The burden will be met partly by revenues and partly through oil bonds already approved by the Government, Oil and Petroleum Minister Murli Deora told reporters here.

Despite several measures taken by the RBI to control rising prices, the headline inflation rate moved up to 6.73 per cent for the week ended February 3, from 6.58 per cent during the previous week mainly due to higher food and manufactured product prices, official data released today showed.

After the deduction, the retail selling price of petrol in Delhi will be Rs 42.85 per litre and of diesel Rs 30.25 a litre.

Mr Deora said the prices in other states would vary marginally.

After raising the repo rate by 25 basis points to 7.5 per cent recently, the RBI also hiked the banks' cash reserve ratio (CRR) by 50 basis points from the current 5.5 per cent in an effort to contain the surging inflation.

The decision which was in the offing for the past one week was taken after a meeting held last evening between Prime Minister Manmhohan Singh, Finance Minister P Chidambaram and Petroleum and Natural Gas Minister Murli Deora.

Mr Deora also met UPA Chairperson Sonia Gandhi and apprised her of the prevailing international oil situation.

Ms Gandhi reiterated the UPA government's commitment for protecting the interest of the common man and specially the weaker section from the impact of the international oil prices.

Mr Deora said keeping the totality of circumstances in mind it was decided to reduce the prices from midnight.

He said the decision is in line with his commitment that the prices of petroleum products will be reviewed if international crude oil prices stabilise.

Mr Deora had earlier said the government would review prices if global crude prices slip below 50 dollars per barrel.

He said under-recovery of state-run oil marketing companies was likely to remain at about Rs 50,000 crore this fiscal as against about Rs 72,000 crore during previous year.

UNI