'Oil companies may cut petrol prices from November 16'

New Delhi - 11 Nov 2011 (Reuters): State-run retailers may cut petrol prices by about one percent or at least 0.60 rupees a litre excluding taxes from November 16 as softening Singapore prices have partially offset the impact of a declining rupee, an industry source said on Friday.

It would be the first decrease since June 2010 when the Congress-led government freed petrol prices. A series of hikes since then have drawn criticism from political allies and stirred public outcry amid highinflation.

"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 companiesmay reduce basic prices by at least 60 paise a litre," the source, who requested anonymity, said.

Last week state-run oil retailers raised petrol prices by Rs 1.50 a litre, which rose to Rs 1.80 a litre after adding local taxes in Delhi. It was the fourth increase in oil prices this year.

Petrol is nowhere near as widely used as diesel in India -- accounting for around 10% of fuel demand compared with about 40% for diesel -- but it is high-profile as it powers many of the cars owned by the growing and vociferous middle class.

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 around Rs 68.6 per litre, nearly 68% higher than diesel.

Last week's price rise was made assuming Asian oil prices of about $121 a barrel and an exchange rate of Rs 49.20 to the dollar.

Spot Singapore oil 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 companies usually meet once a fortnight to consider petrol prices but prefer to wait for a considerable change before passing on to the retail level.

Their profitability has been hurt as the government has not raised prices of subsidised fuels -- diesel, kerosene, and cooking gas -- since June this year despite rising global crude oil prices.

The oil firms are likely to suffer a revenue loss of Rs 1.32 trillion 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 Rs 150 billion 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 Rs 74.86 billion in the July to September period.

The other two state-run retailers,Bharat PetroleumandHindustan Petroleum, also reported losses during the quarter.