Click to play videoNew Delhi: The Central Government is looking at key economic issues and in the first of many decisions, has cut petrol and diesel prices from Friday midnight.
While petrol will be cheaper by Rs 5 a litre, a litre of diesel will cost Rs 2 less. Prices of LPG though will remain unchanged.
The move will serve the dual purpose of reining in inflation, now at a seven-month low of 8.4 per cent and also allow the Reserve Bank of India (RBI) to go for deeper policy rate cuts to push economic growth.
"I appeal to you please cooperate with the government and we are watching this price situation," said Union Petroleum Minister Murli Deora.
The decision comes in the wake of crude prices falling from its highs of $147 a barrel in August to around $45 a barrel now.
The cut is an interim one and more cuts are expected closer to the General Election.
So where does the price cut leave the oil companies that Prime Minister Manmohan Singh had said is still to make good the losses?
The companies are making a profit of around Rs 13 a litre for petrol and Rs 3 for diesel but are still bleeding from the subsidies on the kerosene and cooking gas front.
Meanwhile on Saturday the government is also set to announce the stimulus package to remove the pall of gloom that has engulfed Indian economy following the global recession.
After the stimulus package, home loans could get cheaper with a proposed cut in repo and reverse repo rates. However, the cash reserve ratio will remain the same,
The RBI is also likely to announce a fiscal package to prop up the housing, auto and export sectors and excise duty cut on commercial vehicles is also likely, bringing prices down.
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