Updated on Friday, December 05, 2008, 00:00 IST

New Delhi, Dec 05: The government on Friday cut prices of petrol and diesel by Rs 5 and Rs 2 a litre, respectively, as an interim measure while watching the international prices before bringing in more cuts. The price slash is expected to allow Reserve Bank of India (RBI) to go for deeper policy rate cuts to push economic growth.

As an interim measure, the government has decided to cut the prices with effect from midnight tonight, Petroleum Minister Murli Deora said here. He also made it clear that there have been no cut in the rates of LPG and Kerosene prices.

The government had in June raised the prices of petrol and diesel by Rs 5 and Rs 3 a litre, respectively and that of LPG by Rs 50 a cylinder to protect oil marketing firms against losses on account of a rally in crude prices.

Crude oil had subsequently climbed to a record high of USD 147 a barrel in July, but has since come to USD 43.5 a barrel.

At a time when the international crude prices are ruling at four-year low of near USD 45 a barrel, a cut in fuel prices is expected to bring inflation down to a tolerable level and give room to RBI to increase money supply to keep the economy ticking despite the global slowdown.

The Petroleum Ministry has prepared a note for consideration of the Cabinet Committee on Economic Affairs and is pressing for an early meeting, sources said.

Bureau Report