The deficit had narrowed down to Rs 12,900 crore by end of March this year alone both due to cheaper and a lower volume of imports this year, highly placed oil industry sources said here today.

International oil prices have been depressed through the year and touched record lows last week when brent crude sank to as low as $ 11 a barrel. Dubai crude which India mostly buys was also quoted as low as $ 12 to 13 a barrel.

Consequently, state owned oil refineries which buy imported crude for making products as also import a host of petroleum products have been able to pass the benefit of low prices to consumers by reducing prices, sources said.

The benefits in price reduction amounts to over Rs 1,000 crore since October last year, the sources said. A top executive of astate-owned refining and marketing company said we have been able to drop prices of napatha, liquid diesel oil, furnace oil and low sulfur high stock, all industrial inputs, since April this year.

Since the government had decided last year that diesel prices would no longer be under administered pricing mechanism (APM) but linked to import partity prices, its prices had ruled considerably lower as international prices were down.

"We have been able to mop up additional resources because of the adjustments made in the import parity prices of diesel," he said adding this also contributed to a fall in the oil pool account.

Price of naptha was reduced by 8.2 per cent, that of furnace oil by 7.5 per cent, liquid diesel oil by 3.5 per cent and sulfur high stock by 8.0 per cent.

Indian Oil Corporation, Hindustan Petroleum Corporation, Bharat Petroleum Corporation have the lion's share of these products in the market. Also, these products had been freed from APM from April 1 this year.