NEW DELHI, Sept 6: India’s federal cabinet raised gasoline and diesel prices by about seven per cent on Tuesday, the second time in three months to offset a surge in global oil prices, the country’s oil ministry said.
The price of gasoline will rise 7.4 per cent to 43.49 rupees per litre in the capital New Delhi while diesel will cost 7.0 per cent more at 30.45 rupees, the oil ministry said in a statement.
“The hike will be effective from Wednesday (Sept 7),” oil minister Mani Shankar Aiyar said.
Gasoline and diesel prices would rise by a similar amount across the country depending on local tax rates, he said.
However, the government declined to raise the prices of heavily subsidized liquefied petroleum gas and kerosene, widely used by the poor for cooking, Aiyar said.
The price hike would meet only about a tenth of the 400 billion rupee deficit this fiscal ending March 2006 incurred by state-run companies selling oil to domestic consumers at below international rates, the statement said.
It said the government would sell bonds worth more than $2 billion to cover the shortfall.
“We may still have under-recoveries of 40 billion rupees,” Petroleum Secretary S.C. Tripathi told reporters.
Analysts said the failure to raise prices on gas and kerosene would increase the government’s subsidy burden.
“Despite our subsidy bill being very large and getting larger on these two products, there is actually no sign of any impending realignment of the subsidies or reduction of subsidies,” said Sanjeet Kumar Singh, vice-president of Indian investment bank ICICI Securities.
On June 20, India raised gasoline and diesel prices by about the same amount but oil companies have complained that the price of crude oil has continued to soar.
World crude oil prices have risen by more than 50 per cent since the end of 2004 and crossed $70 a barrel last week before dipping on an announcement that the United States would release emergency supplies to offset loss of production from Hurricane Katrina.
“I would say that there is a possibility to correct further, but if you are looking two to three months ahead or thereafter I would tend to believe that we are in for a sustained period in the vicinity of $60,” Singh told AFP.
India imports more than 70 per cent of its energy needs but has been reluctant to raise prices for refined products for much of the past year because of political opposition.
“They should have made changes last year but since they didn’t do it, the past catches up with you,” said Saumitra Chaudhuri, an economic adviser at ICRA Limited, an investment information provider.—AFP