Consumers expecting further cuts in petrol and diesel prices may get disappointed, as recent depreciation in the rupee could restrict oil companies from announcing additional reductions in fuel prices.
Following the fortnightly review of fuel prices, the price of petrol was reduced by 58 paise per litre and diesel prices were cut by 25 paise a litre on 30 November.
With the latest cuts, petrol will cost Rs 60.48 per litre in Delhi, while the diesel prices stand at Rs 46.55, according to Indian Oil Corporation (IOC), the country's biggest fuel retailer.
In the previous review on 16 November, petrol prices were increased by 36 paise a litre, the first hike in five months, while diesel prices were raised by 87 paise per litre.
"The current level of international product prices of petrol and diesel and rupee-dollar exchange rate warrants a decrease in prices, the impact of which is being passed on to consumers with this price revision," PTI quoted IOC, as saying.
However, the latest cuts to fuel prices are much lower compared to reductions seen in August and early September when global crude oil prices fell to multi-month lows and the rupee movements were stable.
Overall, petrol price was slashed by Rs 3.70 paise during August, while on 1 September it went down by Rs 2. Petrol prices were kept revised in September and October due to assembly elections in Bihar.
Meanwhile, the recent depreciation of the rupee has given raise to concerns over the increase in oil import bill, which could put a check of further cuts in petrol and diesel prices. A falling rupee can make oil imports costlier despite a decline in international crude oil prices.
"The Indian rupee is feeling the heat of the rally in the dollar index and has brushed with its two-year lows against the dollar, witnessing losses of around 5.76 per cent year-to-date," The Hindu quoted Sugandha Sachdeva, currency strategist at Religare Securities, as saying.
The rupee continues to hover around two-year low of 66.80 against the US dollar amid fears over interest rate hike in the US. The US central bank is widely expected to start raising policy rates in December, which could pressurize emerging market currencies including Indian rupee.
"Indian rupee's relative outperformance against its EM peers may not sustain in 2016 and beyond," said Deutsche Bank in a note.