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India raises products prices for first time in a year

27 Jun 2011, 10.23 am GMT

India raises products prices for first time in a year

Singapore, 27 June (Argus) — The Indian government has raised domestic fuel prices for the first time since June last year, potentially easing the subsidy burden on state-owned oil firms.

Delhi increased diesel prices by 3 rupees/litre (7¢/l), kerosine by 2 Rs/l and LPG by Rs50 for a 14kg cylinder, with the changes effective 25 June.

The government also abolished a 5pc import duty on crude and reduced the import duty on diesel and gasoline to 2.5pc from 7.5pc.

The increase of domestic fuel prices comes almost exactly a year after the last change to India's heavily subsidised retail market, which included the liberalisation of gasoline prices. Further changes to diesel prices had been expected sooner, but rising inflation concerns have held the government back.

The latest products price increase follows last week's sharp fall in crude prices, which could ease inflationary pressures.

And the increase will reduce the amount of subsidies that state-owned upstream firms pay to refiners as compensation for selling fuel at government-capped prices. Subsidies on oil products alone accounted for 2pc of India's GDP last month, the OECD said in a report calling for an end to the practice.

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