India cuts petrol prices, stems political outcry

India's state-run oil refiners said they would cut petrol prices by more than three percent on Wednesday which could ease near double-digit inflation and end a political outcry. The cut, announced by the companies late Tuesday, marked the first drop in 33 months in the price of petrol. The reduction comes after a political revolt erupted earlier this month in the Congress-led coalition government when the refiners hiked petrol prices for the fourth time in a year. The regional Trinamool Congress, the second-largest party in the coalition with 19 lawmakers, threatened to quit the ruling alliance unless the government rolled back the price rise. Mamata Banerjee, leader of the Trinamool Congress, said the price cut was a "positive step." Other political leaders also welcomed the move. The state-run refiners denied they had been under any political pressure to reduce prices at the petrol pump and said the 3.2 percent drop reflect a fall in international gasoline prices. Petrol in New Delhi will cost 66.42 rupees ($1.31) a litre, down from 68.64 a litre now. The petrol price row had come as the government was already reeling from a series of corruption scandals including the flawed sale of telecom licences that cost the country up to $39 billion. Last year, India's government deregulated petrol prices as it sought to reduce a gaping budget deficit by reducing the massive subsidies it pays to state-run fuel companies. The government insisted Tuesday it had no rule in either the increase or decrease in petrol prices. India still sets prices for diesel and cooking fuels to shield consumers from market forces and the refiners are expected to post combined revenue losses of 1.3 trillion rupees on their sales of subsidised fuels. The fall in petrol prices could help ease inflation which is running at 9.73 percent, despite 13 interest rate hikes aimed at curbing the cost of living.