Petrol price slashed: Auto makers have reason to cheer

Petrol prices were slashed for the second time this month, as a cut of Rs 2.46 per litre was announced yesterday. This move comes a month after the massive Rs 7.54 per litre hike (the single biggest hike ever in India).

The price cut was announced on the basis of the average global oil price rate in the first fortnight of June. Global oil prices have gone down by 8% since then, indicating scope for further price reduction by a rupee. However, oil companies argue that the value of the rupee against the dollar will stall any further rate cuts in the near future.

There has also been constant pressure on the UPA government to rollback the petrol price since last month’s dramatic hike. Interestingly, despite yesterday’s rate revision, strained UPA ally and West Bengal CM Mamata Banerjee accused the government of timing the price cut to influence the upcoming presidential polls.

Current Petrol Price

Delhi: Rs 67.78 per litre
Mumbai: Rs 73.35 per litre
Bangalore: Rs 76.4 per litre
Chennai: Rs 72.27 per litre

Positive market sentiments back?

This move could go some way in bringing back positive sentiments in the market for petrol cars. The constant increase in petrol prices has caused a slump in the demand for petrol cars with more and more customers opting for diesel cars instead. Some reports suggest that many car manufacturers have been stuck with large stocks of unsold inventory. Things may look up for them now.

Yesterday’s cut coupled with the Rs 2.02/ltr cut on 3rd June 2012 has effectively wiped out more than half of last month’s Rs 7.54 / litre hike. There are also unconfirmed reports of a possible hike in diesel price, which could further reduce the difference between petrol and diesel prices (the difference currently stands at Rs 26.50 in Delhi).