NEW DELHI (Reuters) - Indian state-run retailers may cut petrol prices from Nov. 16,

an industry source said, the first cut in nearly three years and the first in the 18

months since the government ended controls.

The cut could be for at least 0.60 rupees a litre, or about 1 percent, the source said

on Friday.

Softening Singapore prices have partially offset the impact of a declining rupee to

offer a small window of opportunity for a cut. Price increases have been unrelenting

hikes since the government freed sales in June 2010, sparking political and public

outcry.

"If the rupee continues at current levels and if Singapore FOB (free on board)

gasoline spot prices continue to average $115.80 a barrel, oil companies may reduce

basic prices by at least 60 paise a litre," the source, who requested anonymity, told

Reuters.

Last week state-run Indian oil retailers raised gasoline prices by 1.50 rupees a litre,

which rose to 1.80 rupees a litre after adding local taxes in Delhi. It was the fourth

increase in gasoline prices this year and came as inflation continues near double

digits.

Petrol prices have not been cut since January 2009. Until June 2010 they were fixed

by the government, which still controls other fuel costs.

Petrol is nowhere near as widely used as diesel in India -- accounting for around 10

percent of fuel demand compared with about 40 percent for diesel -- but it is high-

profile because it powers many of the cars owned by the growing and vociferous

middle class.

In addition, many Indians use petrol-driven scooters for commuting, and families of

four all on a bike are a common sight.

The widening price gap between the two fuels has softened growth of petrol

consumption, which has recently slowed behind that of diesel.

Petrol currently retails for around 68.6 rupees ($1.37) per litre, nearly 68 percent

higher than diesel.

Last week's price rise was based on assumptions of Asian gasoline prices of about

$121 a barrel and an exchange rate of 49.20 rupees to the dollar.

Spot Singapore gasoline prices are currently averaging $115.80 a barrel, according to

Reuters data, while the rupee averaged about 49.30 to the dollar in the fortnight to

Friday.

Indian fuel retailers usually meet once a fortnight to consider petrol prices but prefer

to wait for a considerable change before passing it on to the retail level.

Their profitability has been hurt as the government held back on raising prices of

subsidised fuels -- gasoil, kerosene, and cooking gas -- since June despite rising

global crude oil prices.

The oil firms are likely to suffer a revenue loss of 1.32 trillion rupees on their sales of

subsidised fuels in the current fiscal year ending March 31, 2012.

The finance ministry on Friday agreed to give a cash compensation of 150 billion

rupees to state fuel retailers to partially compensate them for losses on sale of

subsidised fuels in July-September, two finance ministry sources said.