NEW DELHI: With the global oil market entering a bear phase, Brent crude has fallen by more than 20 percent since its peak in June since and more than 16 percent The national oil company plans to reduce prices by around 16 percent.1 per liter, government and industry sources said. The government, which regulates retail prices of diesel, is also considering lowering diesel prices as retailers are charging more than Rs 3 per liter above market prices, sources said. State-owned Indian Oil Corporation (IOC), BPCL and HPCL are expected to meet this week to reduce petrol prices. However, the decision to reduce diesel prices requires Cabinet approval, which is expected after the parliamentary elections, sources said.

In June 2010, the Cabinet decided to deregulate petrol by removing controls on petrol prices in principle. Diesel prices are on the rise. In January last year, the government allowed the state-owned oil marketing company to increase the price of diesel by about 50 paisa a month until the price of crude oil was in line with the market price, sources said.

The plan was aimed at easing the government’s diesel regulations once retail prices were in line with market prices. After September, revenues from diesel sales turned into a surplus, but the government decided to consider deregulation after further monitoring of fluctuations in the international oil market.

The oil ministry is waiting for a higher-level decision. Authorities conducted an inquiry before taking the matter to the Cabinet, the sources said. In the West, the demand for petroleum products is showing a rapid increase due to the fast growing demand for energy for winter heating. This could lead to a spike in fuel prices. Sources said the government is very cautious as diesel prices may affect inflation.