From Thursday, petrol and diesel will cost Rs 5 and Rs 2 a litre less, respectively. Besides, the domestic LPG rate has been brought down by as much as Rs 25 per cylinder.

The rate cuts in petrol and diesel are similar to the ones that came into effect on December 6, 2008.

"This is the first time (that) the retail selling prices (have) gone down below the rates in June 2006. There is no inflationary impact (of fuel prices left) now."

Petrol on June 6, 2006, was priced at Rs 47.51 a litre in Delhi, diesel at Rs 32.47 a litre and domestic LPG at Rs 294.75 a cylinder.

"After today's reduction, petrol in Delhi will cost Rs 40.62 a litre, diesel Rs 30.86 and domestic LPG Rs 279.70 per cylinder," he said.

"We believe in keeping promises. We had promised to reduce prices when international prices come down and now we have done it. This is a big step that will help (the) common man," Deora said.

Petrol in Delhi will cost Rs 40.62 a litre instead of Rs 45.62 per litre, while diesel is being sold at Rs 30.86 per litre as against Rs 32.86 a litre.

Similarly, a 14.2-kg domestic LPG cylinder will now cost Rs 279.70 in place of Rs 304.70.

While state-run oil firms were making a neat Rs 9.86 a litre profit on petrol before this price reduction and Rs 3.48 on every litre of diesel, they were still losing Rs 32.97 per LPG cylinder and Rs 12.16 per litre of kerosene. The reduction could have been sharper but for the losses on LPG and kerosene.

Petroleum Secretary R S Pandey said no decision on raising excise and customs duty to mop up any extra revenue has been taken. Also, the parallel proposal of freeing petrol and diesel prices from administrative control has not been acted upon.

"The government," he said, "will make good all of the losses of state-run retailers after accounting for Rs 32,000 crore contribution from upstream firms, through issue of oil bonds."

Unprecedented volatility in international oil prices has been witnessed in 2008-09. While on the one hand, the Indian basket of crude oil touched USD 142 per barrel on July 3, on the other, it plummeted to USD 35.83 a barrel on December 24.

In spite of the softening in oil prices, the PSU oil marketing companies (OMCs) incurred under-recoveries of more than Rs 1,06,000 crore during April-December 2008 on sale of petrol, diesel, domestic LPG and kerosene.

To compensate the public sector OMCs, the government has already approved issue of oil bonds worth Rs 60,967 crore and the upstream oil companies - ONGC, GAIL and OIL – have contributed Rs 32,000 crore.

"Whatever is the under-recovery (revenue loss) at the end of the fiscal, will be compensated by the Government through issue of oil bonds," Pandey said, adding more oil bonds could be issued.

Following are the new rates of petrol, diesel and domestic LPG in four metro cities:

Cities - Current price - New Price (Decrease) (in Rs.)

PETROL

Delhi: 45.62 40.62 (5.00)

Kolkata: 47.16 44.05 (3.1)

Mumbai: 49.80 44.55 (5.25)

Chennai: 49.66 44.24 (5.42)

DIESEL

Delhi: 32.86 30.86 (2.00)

Kolkata: 33.92 33.21 (0.71)

Mumbai: 36.69 34.45 (2.24)

Chennai: 34.98 32.82 (2.16)

LPG

Delhi: 304.70 279.70 (25.00)

Kolkata: 352.05 327.05 (25.00)

Mumbai: 349.50 312.05 (37.45)