Pressure is mounting on Government of India to cut domestic petrol and diesel prices, but Oil Ministry is not ready for a quick cut due to many factors.

Govt last revised oil prices on 5th June 2008 when international crude oil price was at $127.79 per barrel. With that revision retail price of petrol increased from 50.51 to 55.04 in Chennai. From that $127 level crude surged to an all time high of $147 in July and then dropped to $65 level this month, almost a 55% drop in just four months.

So Govt is under intense pressure to reduce the domestic rates when international prices halved in last 4 months. But if we study the history even though there was a big drop in international price it is still in the 2006 and 2007 levels. Recent plunge only helped to just erase the gains it made in last 2 years.

On April 2006 crude was at $66.74 and petrol price in Chennai was at Rs 47.49. Even after two and half years crude is at the same level (and petrol price at 55.04).

But this 8 Rupees increase in last two and half years is quiet reasonable especially when inflation is in two digits. During this period overall expenses have surged for oil companies like salary, transportation, dealer commission etc.

Also Rupee plays another important role in this. Rupee was at 44.82 against US Dollar in April 2006 and then dropped to 39 level by beginning of this year and is now trading above 49 level.

So when Rupee jumped from 44 level in 2006 to 49 level in this month oil companies have to spend extra Rs 325 per barrel. India's daily consumption is around 25 lakh barrel per day, so totally it adds an additional 81 crore rupees per day burden to oil companies balance sheet. So whatever oil companies gained from the recent oil price drop will get adjusted with this amount.

But Government may go for a price revision soon as pressure is building up from all corner for a price cut when five states are going to polls in another few weeks.