Following the recent reduction in domestic LPG prices, the Central government is contemplating a potential cut in petrol and diesel prices by Rs 3-5 per litre around Diwali. This consideration aligns with the commencement of crucial state elections scheduled for November-December, as highlighted in a report by JM Financial Institutional Securities.
Just last week, the government took a significant step by lowering the price of the domestic 14.2kg LPG cylinder by Rs 200 per cylinder, a move benefiting all 330 million consumers, effective from August 30. This decision aimed to provide relief to the common man who had been grappling with the recent surge in inflation.
The report suggests that this forthcoming cut in petrol and diesel prices is likely to materialize through a reduction in excise duty and/or VAT. This strategy is prompted by the fact that oil marketing companies (OMCs) have been operating at a loss due to the high crude oil prices.
However, the report also presents the possibility that the government may encourage OMCs to implement these price cuts, especially since their financial positions have largely improved, thanks to anticipated robust profits in the first half of FY24. This multifaceted approach reflects the government’s efforts to address economic concerns while considering the political landscape and the well-being of its citizens.
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