NEW DELHI: India may announce more measures to curb fuel consumption later this month and raise diesel prices by close to 10 percent soon in a bid to cut the biggest item in its import bill and support the rupee, government officials said.
The world’s fourth-biggest energy user is considering a Rs3-5 increase in the price of diesel, which accounts for over 40 percent of fuel use, as it looks to cut oil costs by nearly $20bn.
Rising global prices of crude oil and a slide in the rupee have left India facing an oil bill potentially 50 percent higher than on May 1.
“The timing and the quantum of the hike is a political decision,” said a government official who declined to be named. “But it should happen. Political discussions are going on.” The official said it would come sometime after the current parliament session ends today.
Foreign Minister Salman Khurshid said his oil ministry counterpart, M Veerappa Moily, could announce steps to curb fuel consumption on September 16, when he returns from a trip to South Korea and Japan.
“No matter what happens, we will have to cut down on fuel consumption,” Khurshid told business channel CNBC TV18. “You can’t keep subsiding the costs of fuel and not restrict the use of fuel.”
Moily suggested ways to cut fuel import costs in letters to the prime minister and finance ministry a week ago, ranging from a street theatre campaign to encourage careful use of fuel to stepping up imports from Iran, which India pays for in rupees. The official said talks were also on with Iraq, India’s biggest crude supplier, to pay in rupees for its oil.
Khurshid said Indians were increasingly realising the inevitability of moving away from government-controlled prices. “That’s beginning to happen but has political implications,” he said.
Fuel price rises generally provoke stiff resistance from opposition parties, and any increase now is expected to draw a bigger protest as India approaches a general election. The election must be held by May 2014.
The official said the government also hopes to be able to raise prices of cooking gas and kerosene, calculating the rupee’s fall has added Rs350-400bn ($5.3-6.1bn)to its subsidy bill.
These two fuels are used largely by India’s poor and aspiring middle classes, making increases a hot political issue.
Overall use of fuel products rose 1.1 percent between April and July.
REUTERS
