Indian fuel prices jump 10pc
Thursday, 5 June 2008
Joe Leahy in Mumbai and Amy Yee in New Delhi, FT Syndication Service
India's government Wednesday increased the price of petrol and diesel at the nation's fuel pumps, ending weeks of political wrangling over what to do about the ballooning fiscal burden of state oil subsidies.
The government will increase from midnight Wednesday the retail price of petrol by Rs5 per litre, or about 10 per cent of the Mumbai pump price, and of diesel by Rs3, about 8.3 per cent of what it presently costs motorists in India's financial capital.
The move provoked an angry reaction from India's left parties, on which the Congress party-led ruling coalition depends for its parliamentary majority.
They vowed to stage national protests against any hike in oil prices beginning Thursday and said that the climbing prices of commodities and food is becoming "unbearable" for common people.
Raising oil prices will have a "cascading effect and heap further burdens on the people", said the Communist Party of India (Marxist).
India's moves on fuel prices follows similar steps in other Asian countries, such as Indonesia and Malaysia.
But India's price rise, only the second in two years, still leaves the government with an enormous fiscal hole to fill from the fuel subsidies.
India imports more than 70 per cent of its oil needs and has been hard hit by the sharp rise in the price of crude, which has almost doubled in a year.
With inflation reaching over three-year highs of more than 8 per cent in recent weeks, the government has been reluctant to increase fuel prices for fear of hurting the nation's hundreds of millions of poor who scrape by on one or two dollars a day.
Prime minister Manmohan Singh is scheduled to give a speech on the price hike later this evening. Earlier this week, he prepared the ground for an increase, saying the unrelenting price rise of crude oil process threatens development.
"It can have adverse consequences for the global war against poverty. We therefore need a new global compact between oil producers and the developing world," said Mr Singh.
Mr Deora described Wednesday's fuel price increases as "marginal". To bring retail prices into line with global markets, the rise for petrol should have been around four times bigger and diesel 10 times larger.
Without the increase, the government oil companies are facing a deficit of $57.8bn from selling fuel at a subsidised price.
In addition to the fuel price increases, the government proposed cutting excise duty on fuel and increasing the amount of oil bonds that it issues to state fuel marketing companies to plug the hole in their balance sheets created by the subsidies.
India's government Wednesday increased the price of petrol and diesel at the nation's fuel pumps, ending weeks of political wrangling over what to do about the ballooning fiscal burden of state oil subsidies.
The government will increase from midnight Wednesday the retail price of petrol by Rs5 per litre, or about 10 per cent of the Mumbai pump price, and of diesel by Rs3, about 8.3 per cent of what it presently costs motorists in India's financial capital.
The move provoked an angry reaction from India's left parties, on which the Congress party-led ruling coalition depends for its parliamentary majority.
They vowed to stage national protests against any hike in oil prices beginning Thursday and said that the climbing prices of commodities and food is becoming "unbearable" for common people.
Raising oil prices will have a "cascading effect and heap further burdens on the people", said the Communist Party of India (Marxist).
India's moves on fuel prices follows similar steps in other Asian countries, such as Indonesia and Malaysia.
But India's price rise, only the second in two years, still leaves the government with an enormous fiscal hole to fill from the fuel subsidies.
India imports more than 70 per cent of its oil needs and has been hard hit by the sharp rise in the price of crude, which has almost doubled in a year.
With inflation reaching over three-year highs of more than 8 per cent in recent weeks, the government has been reluctant to increase fuel prices for fear of hurting the nation's hundreds of millions of poor who scrape by on one or two dollars a day.
Prime minister Manmohan Singh is scheduled to give a speech on the price hike later this evening. Earlier this week, he prepared the ground for an increase, saying the unrelenting price rise of crude oil process threatens development.
"It can have adverse consequences for the global war against poverty. We therefore need a new global compact between oil producers and the developing world," said Mr Singh.
Mr Deora described Wednesday's fuel price increases as "marginal". To bring retail prices into line with global markets, the rise for petrol should have been around four times bigger and diesel 10 times larger.
Without the increase, the government oil companies are facing a deficit of $57.8bn from selling fuel at a subsidised price.
In addition to the fuel price increases, the government proposed cutting excise duty on fuel and increasing the amount of oil bonds that it issues to state fuel marketing companies to plug the hole in their balance sheets created by the subsidies.