Mumbai: State-run oil marketing firm Indian Oil Corporation has announced a 4.3-4.4 per cent cut in the price of aviation turbine fuel (ATF) after the government halved the customs duty on the fuel from 10 per cent to five per cent.

Effective today, ATF in Delhi will cost Rs66,226.66 per kilo litre, down Rs 3,000.42 per kl, while in Mumbai it will cost 4.36 per cent less at Rs68,626.87 per kl, sources at the Indian Oil Corporation said.

The government yesterday announced a reduction in customs duty on petroleum products to five per cent from 10 per cent as part of efforts to ease losses at state oil companies.

An across-the-board five per cent cut in customs duties also brought down import duty rates on crude oil to zero, on petrol and diesel to 2.5 per cent and on other products like naphtha for non-fertiliser use to five per cent.

Besides, excise duty on petrol has been cut by Re1 a litre to Rs13.45 and on diesel to Rs3.60.

The government will also increase the crude oil subsidy to oil refiners by upstream companies like ONGC and OIL to Rs45,000 crore this fiscal from Rs25,708 crore last year.

The Reserve Bank of India, meanwhile, said refiners would be able to hedge imports of crude oil on overseas exchanges. The RBI move will ease pressure on state-run firms which have to sell fuel at below-market state-set prices.

State-run refiners such as Indian Oil Corp, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd say revenue losses from selling at fixed retail prices mean they are running out of money to import crude oil.

"In order to provide greater flexibility, it has been decided to permit domestic crude oil refining companies to hedge their commodity price risk on crude oil imports in overseas exchanges/markets," the central bank said in a note on its website.

The RBI said refiners had sought greater hedging capacity because of volatile markets. Oil prices surged to a record high above $135 a barrel last month.

Oil marketing firms would now be able to hedge up to the greater of half of their volume of imports during the previous year or half their average volume of imports in the three previous fiscal years.

Further, refiners would be able to hedge domestic purchases of crude oil and sales of petroleum products on the basis of underlying contracts linked to international exchanges or markets.