NEW DELHI: Petrol price was today cut by Rs 2 per litre with effect from midnight tonight, the steepest reduction in rates in nine months.While petrol price has been cut by Rs 2 per litre, excluding local sales tax or VAT, there will be no change in diesel rates.After including VAT, the reduction in price of petrol in Delhi comes to Rs 2.40 per litre and the fuel will from midnight tonight cost Rs 68.34 per litre as against Rs 70.74 currently.It was expected that oil firms will also effect the monthly hike of 40-50 paise per litre in diesel rates but they deferred the decision apparently to save the government from trouble in Parliament.When oil firms had last hiked petrol price on March 2, the Opposition parties had disrupted one full day's proceedings.The cut in petrol price follows two rounds of hike in rates since February. Petrol price was hiked by Rs 1.50 a litre on February 16 and then by Rs 1.40 per litre from March 2. Both the increases were excluding local VAT.The reduction in rates was possible as international oil prices have eased. While the slide in international prices of crude oil from USD 112.73 per barrel to USD 107.41 enabled reduction in petrol prices, it also helped lower losses on diesel sales.Losses on diesel have come down to Rs 8.64 per litre from Rs 11.26 at the beginning of the month, according to Indian Oil Corp (IOC) which announced the price revision.Oil firms calculate the desired retail price on 1st and 16th of every month based on average imported oil price on the previous fortnight.Petrol price had last been cut by over Rs 2 per litre in June 2012 when prices were reduced from Rs 70.24 to Rs 67.78 per litre.IOC, the nation's largest oil firm, said rupee had depreciated marginally. "Following this trend, it has been decided to pass on the benefit to the customers," the company said in a statement.Though petrol price had been deregulated in June 2010, they have rarely moved in tandem with cost. This resulted in Rs 500 crore loss to IOC (Rs 1,130 crore loss to state fuel retailers) during current fiscal.However, since January, when the government decided to cut subsidises by asking oil firms to moderate prices in step with cost, petrol prices have moved in sink with cost.Diesel prices continue to be regulated but the government had in January authorised oil firms to hike their rates by 40-50 paise per litre every month till such time that the entire revenue loss on the fuel is completely wiped off.Oil firms raised diesel prices by 50-51 paise per litre on two occasions and today was the third opportunity but they decided not to revise rates.IOC said in addition to losses on sale of petrol, oil firms are suffering under-recovery (revenue loss) on sale of diesel of Rs 8.64, kerosene of Rs 33.43 per litre and domestic LPG of Rs 439.00 per cylinder.The company would end the fiscal with a revenue loss of fuel sale of around Rs Rs 86,500 crore, the statement said. The industry (IOC plus two other fuel retailers) would report a revenue loss of Rs 163,000 crore during current year."The movement in international oil prices and Rupee-USD exchange rate is being monitored and decision on future price changes shall be taken accordingly," the statement added.