The three OMCs Indian Oil Corp, Hindustan Petroleum and Bharat Petroleum are now estimated to lose Rs 1.11 lakh crore in fiscal 2008-09 with largest chunk of Rs 96,000 crore in the first half of the fiscal. They started making the profits on both auto fuels from November but today’s cuts would take away Rs 5,3000 crore.

Sources said that the price reduction had the consent of Congress chairperson Sonia Gandhi and has been timed to bolster the feel-good factor that is being ushered tomorrow with a fiscal relief package to boost the slowing economy.

Today’s price cuts would provide an extra Rs 6,000 to the people who could use it for other consumer goods. It would also help lower the inflationary pressure on the WPI where Fuel, Power, Light & Lubricants Group has 14.23 percent weight.

In June, the government raised the price of petrol by Rs 5 per litre, diesel by Rs 3 per litre and domestic LPG by Rs 50 per cylinder due to the high international prices of crude oil that touched a peak of $147 a barrel mid-July. Since September, crude prices started sliding and are now at a four-year low of $43.5 a barrel but the government could not revise prices downwards as the Model Code of Conduct was in force.