India not to cut fuel prices despite drop in crude

STAYING FIRM: India will consider cutting fuel prices only if the average cost of the crude oil it imports falls sharply to $67 per barrel, Oil Minister Murli Deora said on Tuesday.

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New Delhi: India will consider cutting fuel prices only if the average cost of the crude oil it imports falls sharply to $67 per barrel, Oil Minister Murli Deora said on Tuesday.

U.S. light crude for October delivery tumbled by as much as 4 percent to a seven-month low on Tuesday to about $92.5 a barrel. The average price of Indian crude oil imports was about $91 on Monday.

"We welcome reduction in oil prices but still public-sector companies are losing money. The day when the prices fall to $67 per barrel, it can be considered," Deora said.

However, analysts say the Indian government, battling high inflation, would be inclined to cut fuel prices ahead of next year's general elections.

Deora said the fall of the Indian currency was partly offsetting the gains of cheaper crude as the rupee cost of oil was increasing.

The Indian rupee fell to its weakest level against the dollar since August 2006 on Tuesday, hit by concerns about capital outflows following upheaval on Wall Street and heavy dollar demand from oil firms and foreign banks.

India's decision to keep fuel prices low in the past few years despite soaring crude prices have helped lift domestic oil demand, which in turn has supported global crude oil prices.

Domestic oil product sales in July rose an annual 7.8 percent, helped by high diesel demand from power producers.