Petrol and diesel are likely to turn cheaper in India as global oil prices slumped to four-year lows of around $70 a barrel on Thursday after OPEC — a  group of major oil supplying countries — decided against cutting back production.

India imports nearly two-thirds of its crude oil requirement. The sharp fall in global crude prices will cut companies’ import bills,  enabling them to reduce retail prices of petrol and diesel.

Domestic oil industry sources said petrol prices could fall below Rs. 60 a litre in the coming weeks, if the slide in global crude prices continues to follow the current pattern. Lower fuel costs will aid the government’s efforts to keep inflation low and stable.

India’s retail inflation fell to a three-year low of 5.52% in October while the wholesale inflation rate plunged to a five-year low of 1.77%, aided by a sharp drop in vegetable and petrol prices. Lower inflation, in turn, could prompt the Reserve Bank to cut interest rates and nudge banks to lower home loan EMIs.

“If the slide in oil prices continues, we can expect petrol prices to drop below Rs. 60 a litre from around Rs. 65 presently (in Delhi),” said the chairman of a leading oil company seeking anonymity.

The Organization of Petroleum Exporting Countries, a cartel of 12 oil producing nations that controls 40% of the world’s oil output, in a five-hour meeting in Vienna decided not to reduce production, despite a 30% fall in oil prices since June.

Since August, petrol has turned cheaper by Rs. 9.36 a litre in six price cuts, while diesel prices have been cut by Rs. 5.62 a litre since October. Petrol now cost Rs. 64.25 a litre in Delhi and Rs. 71.91 in Mumbai. Diesel, India’s most consumed fuel, costs Rs. 53.35 a litre in Delhi and Rs. 61.04 in Mumbai. Prices vary between states due to local levies.

Softer crude prices will also bolster the government’s plans to tame inflation and curtail fuel subsidies. A lower subsidy bill will help contain fiscal deficit — a measure of the amount the government borrows to fund its expenses — at the budgeted level of 4.1% of GDP in 2014-15.

Being the world’s fourth-largest oil consumer, India imports around 190 million tonnes of crude oil a year at $145 billion, or more than a third of its total import bill. With every dollar decrease in oil prices, the government’s oil import bill comes down by Rs. 4,000 crore.

Source:hindustantimes.com