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India's government has raised fuel prices to stem huge losses
at state oil firms caused by surging crude costs. Petrol prices were increased by 11 percent or five rupees (12 cents)
and diesel by 9.4 percent or three rupees based on pump prices in the
capital.
But the Congress-led government, which fears voter reaction over
already high inflation with general elections looming within a year,
left kerosene prices, widely used by the poor for cooking, unchanged.
"The government is committed to protecting the interest of the common
man," said Petroleum Minister Murli Deora, who insisted the government
had raised fuel prices only "marginally."
But the government boosted the cost of an liquid petroleum gas (LPG), also widely used for cooking, by 50 rupees a cylinder.
The government has been looking for weeks for ways to bail out state
oil firms that sell fuel at hugely discounted rates and are reeling
from the sharp rise in global crude prices. "The companies were running
out of cash and hence might have (had) to limit their imports," M. S.
Srinivasan, India's petroleum secretary, told a news conference.
The left-leaning government sets the discounted fuel prices to shield
India's poor masses from high fuel costs and to help check inflation,
now at a near four-year high of 8.1 percent. Srinivasan said the fuel
price hike could lift inflation by around half a percentage point. At
the same time, the government cut excise duty on petrol by one rupee a
litre and abolished customs duty on crude oil imports. "The customs
duty on crude has been cut to nil," said Srinivasan.
India's Prime Minster Manmohan Singh was due to address the nation late
on Wednesday to explain the reasons for the fuel price hike and face a
storm of protests. "This action is disastrous for the economy and all
the claims made by the prime minister so far on the front on inflation
has been proved to be a hoax," the spokesman for the main opposition
BJP, Rajiv Pratap Rudy, told the Press Trust of India.
Last February, India hiked fuel prices for the first time in 20 months,
raising gasoline prices by 4.6 percent and diesel by 3.3 percent. The
price of cooking gas was last raised in April 205. The petroleum
ministry had been proposing a 10 rupee a litre hike in prices of
petrol, five rupees a litre hike in diesel.
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