Petrol and diesel prices are unlikely to be lowered following an 8 per cent cut in rail freight charges announced by Railway Minister Lalu Prasad in the Railway Budget for 2006-07.
About 35-40 per cent of the 54 million tonnes petrol and diesel consumed annually is moved on rails and the cut in freight charges would result in savings in excess of Rs 160 crore (Rs 1.60 billion) to the oil industry, said an official of Indian Oil Corp (IOC).
But it is unlikely to have any impact on prices of petrol and diesel, as freight assumed to calculate the retail selling price of the two auto fuels was substantially lower than the new freight rates.
"The price build-up of petrol and diesel factors in a notional 50 per cent of the prevailing rail freight. The 8 per cent cut in rail freight will therefore not have an impact on the price build as the new freight charge would continue to be higher than what is accounted for in the price build-up," the official said.
The move would, however, save IOC between Rs 60 and 80 crore (Rs 600-800 million) annually on moving petrol and diesel from refineries to inland consumption centres on rails.
More than 40 per cent of the fuel is moved to consumption centres through pipelines, which are cheaper than railways, he said.