New Delhi: Following the recent cut in domestic LPG prices, the Central government may cut petrol, and diesel prices by Rs 3-5 a litre around Diwali given that key state elections start from November-December, JM Financial Institutional Securities said in a report.

Last week, the government cut the price of the domestic 14.2kg LPG cylinder by Rs 200/LPG cylinder for all 330 million consumers with the effect from August 30. This was to give relief to the common man from the recent surge in inflation.

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As a follow-on action, the government may cut petrol/diesel prices by RS 3 to 5 per litre around Diwali given key state elections in November-December, the report said.

"This cut should mostly happen via the reduction in excise duty and/or VAT given oil marketing companies are losing on the auto-fuel marketing business at the current high crude price," the report said.

"However, we cannot rule out a scenario whereby the government may nudge OMCs to cut petrol/diesel prices as their balance sheets have largely got repaired due to likely strong profits in the first half of FY24," the report added.

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