The government on Tuesday said that prices of petrol and other fuel could be lowered if global crude prices continue to slip further.
A fall in crude prices would also help the government bring down its subsidy bill on fuel which would help curb the fiscal deficit. The government has projected the fiscal deficit at 4.6 per cent of GDP for 2011-12.
"We are not fully satisfied with the downward movement from $107 per barrel to $102 per barrel, the prices are still reasonably high," said Finance Minister Pranab Mukherjee.
"We hope prices of oil and other commodities will come down further, which will help us to manage inflation and also help in reducing subsidy on oil," he added.
Global crude oil prices have been falling after credit rating agency Standard and Poor downgraded the sovereign debt of the US.
Speaking on the decline, Petroleum Minister S. Jaipal Reddy also said that if the prices fall any further it will be passed on to the consumers.
"If the prices globally come down sharply and in a stable way, naturally the prices of petrol would be adjusted downwards," Reddy told reporters.
Petrol prices have been de-regulated and now oil marketing companies price the fuel on the retail level according to global movement of crude. This has led to sharp increases in the petrol prices.
Other fuels like diesel, kerosene and cooking gas are still under government control. The petroleum ministry had hiked prices of fuel in June as global crude oil prices shot up.
A dip in prices of fuel will also have a sobering effect on high inflation, which has been troubling policymakers for over two years.