New Delhi, Nov. 14: The price of the Indian basket of crude has dipped below $50 per barrel for the first time in three-and-a-half years, severely testing the government’s dogged stand not to cut fuel prices in the interests of PSU oil retailers.

On Thursday, the Indian basket touched $48.57 per barrel — a level last seen in May-June 2005 when it was hovering in the range of $48-52. The Indian basket is a mix of crude oil from West Asia and the North Sea.

Average price in the first half of this month was $57.16 per barrel, about $6 lower than the previous 15 days.

Crude’s steady decline has sparked a debate on the desirability of a fuel price cut. Prime Minister Manmohan Singh and petroleum minister Murli Deora have maintained that a cut was possible only after crude and the rupee stabilised. On the other hand, the Opposition as well as some members of the ruling Congress have been demanding relief.

According to petroleum ministry officials, crude price has to stabilise below $50 and the rupee needs to appreciate to 41 per dollar for a fuel price reduction to be viable.

At Rs 48.9 to the dollar, the Indian currency is way off that target. Besides, average crude price so far in the current fiscal was $106.64 per barrel, substantially higher than $79.25 in the last fiscal year.

Sources in the oil industry said the government should not reduce fuel prices as firms were suffering losses on the crude bought in June and July, when it was at a record high.

Oil retailers are making marginal profit on petrol, but suffering huge losses on kerosene and LPG sales. As crude dips, firms are likely to earn profit from diesel sales as well. Currently, the profit on petrol is Rs 4.12 per litre.

Jet fuel price

Jet fuel is likely to be cheaper by another 6 to 8 per cent with the fall in global crude price.

The prices have dropped 20 per cent over the last two months, though the leading airlines are yet to provide relief to flyers.

According to the aviation ministry, airlines are expected to suffer Rs 8,000-crore loss this fiscal, twice as that of 2007-08. The ministry believes airlines could cut capacity by as much as 20 per cent as well as trim schedules.