Petroleum and Natural Gas Minister Murli Deora made a formal statement in both Houses of Parliament following a decision on Tuesday night. He cited the commitment made by the government to protect vulnerable sections from oil shocks and the fall in international crude prices to $56-58 (Rs 2,500-2,600) per barrel -- from $75 (Rs 3,375) in August.

About the decision, Finance Minister P. Chidambaram said: "It should help in easing (inflation) to some extent, but it (inflation) is mostly driven by primary products." V. Raghuraman, principal adviser, energy, Confederation of Indian Industry, said: "Fuel-price reduction is good for the consumer. It has been done to contain inflationary trends, and to that extent it is quite positive for the economy." The additional burden on the government, following the lowering of oil prices, is estimated to be around Rs 3,000 crore. Indications are that a large chunk of it will be passed on to the oil companies, while the Rs 18,000-crore oil bonds issued in June will take care of the Centre's own quota of the subsidy burden.

The Petroleum and Natural Gas Ministry estimates that the profitability of oil companies will go down from Rs 3.67 per litre to Rs 2 on petrol. On diesel, state-owned companies will register losses of Rs 2 per litre against the current Rs 1.01.

Down for once onceDown PETROL 39 Rs Nov 4, 2004 40.49 Rs June 20, 2005 43.49 Rs Sept 6, 2005 46.85 Rs June 20, 2006 44.85 Rs Nov 29, 2006 DIESEL 26.28 Rs Nov 4, 2004 28.45 Rs June 20, 2005 30.45 Rs Sept 6, 2005 32.25 Rs June 20, 2006 31.25 Rs Nov 29, 2006