State-run oil marketing companies that have gained from a record Rs7.54 a litre hike in petrol prices last month, amidst high crude prices, have now agreed to cut petrol prices by as much as Rs4 a litre, although hesitantly.

"Yes, there is a scope for reduction in petrol prices. But I will not stick my neck out and say there will be a reduction for sure as we have to watch for volatility in the rupee as well," a top official at one of the three PSU oil retailers said.

State-owned fuel retailers, who as per practice revise rates of petrol on 1st and 16th of every month based on average imported cost and forex rates of the previous fortnight, had skipped changing rates on June 16.

Petrol at present costs Rs 70.24 a litre at IOC petrol pumps in Delhi.

He said the last revision was done keeping in mind an average of USD 115.77 per barrel rate of gasoline, against which domestic petrol prices are benchmarked.

Gasoline rates have since fallen to about USD 97 a barrel. But the rupee has devalued to Rs 57 to a US dollar from Rs 54.96 to a US dollar (average of first fortnight of June).

There was a scope to reduce petrol price by up to Rs 4 per litre but with rupee falling further, the cost of imports has again risen, he said.

"There is a lot of volatility in oil prices as well as value of rupee. We are watching the situation very closely," he said.

The official said the gasoline cracks or the difference between cost of raw material (crude oil) and the price of product (petrol) had narrowed to just USD 3 per barrel. In comparison, cracks for diesel were as high as USD 12-13 a barrel.

With such narrow spread, any upward movement in crude oil price or devaluation of rupee would force an increase in price in near future, if the rates were to be cut now.