Petrol price may be cut by Rs 2 a litre on Nov 17

State-run fuel retailers are set to reduce petrol price by as much as Rs 2 a litre from Thursday following a gentle prod from the government to pass on the benefit of recent softening in the fuel's price in bulk markets and a comparatively lower average rate for crude through the better part of the fortnight.

This will be the first reduction in the fuel's price since June 2010 when it was unshackled from the government's pricing control and douse popular and political anger ahead of Parliament's winter session, scheduled to begin from November 22.

Since decontrol, the oil marketing companies on record have been free to set the street price of petrol. But in practice, they never do so without an informal nod from the oil ministry since the government is the majority stakeholder.

True to this tradition, the ministry has already conveyed to the oil companies its arithmetic showing ground for a major reduction. The chief executives of the three oil marketing companies are to meet on Wednesday and announce the reduction that will make pump prices even lower than the level on November 3 when the price was raised by Rs 1.80 a litre.

The ministry started tracking movements in prices of crude and products in international markets as well as the rupee's exchange rate more closely after the November 3 price increase sparked a sharp public outcry and drew allegations of lack of transparency in the pricing mechanism.

Hopes of a reduction had brightened on Friday when Brent North Sea crude for December delivery shed 61 cents to a tad over $113 a barrel and New York's main contract, light sweet crude for the same delivery period, retreated 23 cents to $97.55. Simultaneously, the price of petrol in Singapore bulk market too dropped to $115 a barrel from an average of $125 last month.

Petrol price in India is benchmarked to a combination of Brent and Dubai crude and petrol's rates in the Singapore bulk market. The oil marketers follow a fortnightly pricing cycle and the fall in crude and product prices have brought down the average for the fortnight and also offset the impact of the rupee's fall from 46 to about 49 to a dollar.

When the oil companies jacked up petrol price on November 3, TOI had then first reported that the companies went for the price increase even when they had started making about 25 paise since October 28, implying they should have waited a bit longer in view of the emerging trend. But the oil companies had said "over-recovery" for 3-4 days did not make any difference to their "precarious" financial situation due to accumulated losses.

But the explanation from oil companies did not cut ice with political parties, including UPA partner Trinamool Congress, who demanded a rollback. Trinamool leader Mamata Banerjee even threatened to pull out from the government. The main opposition BJP warned that Parliament's winter session, scheduled to begin on November 22, could be stalled over the issue