Govt to raise diesel prices once finance bill approved: source

NEW DELHI Thu Apr 12, 2012 9:55pm IST

Workers fill diesel in plastic containers at a fuel station in Noida in Uttar Pradesh January 27, 2011. REUTERS/Parivartan Sharma/Files

Workers fill diesel in plastic containers at a fuel station in Noida in Uttar Pradesh January 27, 2011.

Credit: Reuters/Parivartan Sharma/Files

Stocks

   

NEW DELHI (Reuters) - India will raise retail prices of subsidised fuels, including diesel, once parliament approves the finance bill for the current fiscal year early next month, a senior government source with knowledge of the matter said on Thursday.

Parliament is expected to consider the finance bill on May 7 and approve it a couple of days after that.

"The government's credibility on fiscal consolidation is at stake. After crude prices remaining over $120 a barrel, hike in oil (fuel) prices is certain," the source, who did not wish to be named because of the sensitivity of the issue, told Reuters.

"We cannot do without it. Once the finance bill is approved, oil prices including diesel would be raised," he said.

Finance Minister Pranab Mukherjee has vowed to raise fuel prices as soon as possible to tackle a rising subsidy burden and large deficits, but the move is politically fraught for the weak coalition government, already under fire over high inflation.

Diesel prices were last raised in July and the government has still not fulfilled a promise to fully liberalize the market. It was expected to raise prices earlier this year.

India imports about 80 percent of its crude oil needs. Rising global prices increases its import bill and widens the trade and current account deficits.

In theory, India allows state fuel retailers to fix petrol prices to market rates but continues to cap prices of other fuels at a lower rate to rein in inflation and protect the poor.

However, the state fuel retailers - Indian Oil Corp (IOC.NS), Bharat Petroleum Corp (BPCL.NS) and Hindustan Petroleum Corp (HPCL.NS) - have not raised prices of petrol since December in line with global trends due to an unofficial dictat from the government.

Any price rise will help curb rampant diesel use, which has increased as the market-driven price of alternatives like fuel oil have jumped. Diesel now accounts for a third of local fuel use.

The source indicated gasoline prices could be raised around the same time as diesel.

Softening inflation, currently at about 7 percent, also strengthens a case for a hike in fuel prices.

The government will not reverse a hike in gold import duty to 4 percent from earlier 2 percent, introduced in March, the source said, adding it may abolish an excise duty levied on non-branded jewellery.

Jewellery traders across the country went on strike last month protesting against the duties. The industry called off the strike after it said the finance minister promised to reconsider.

(Editing by Frank Jack Daniel)

FILED UNDER:

Reuters Showcase

Legal Complaints

Legal Complaints

Government's payday from telecoms auction could be delayed  Full Article 

Running State Banks

Running State Banks

India signals private-sector bosses could run state-owned banks  Full Article 

India Forecast Raised

India Forecast Raised

S&P raises India's GDP forecasts, says it's a bright spot in Asia  Full Article 

StanChart CEO

StanChart CEO

StanChart picks ex-JPMorgan exec Winters as CEO to replace Sands  Full Article 

Wockhardt Plant

Wockhardt Plant

Wockhardt says FDA raises new concerns about Waluj plant  Full Article 

Banking Sector

Banking Sector

State-owned banks' capital needs may be higher - RBI deputy  Full Article 

Shares Sale

Shares Sale

Bharti Airtel says raised $310 mln through share sale in tower unit  Full Article 

Inflation Target

Inflation Target

India should meet RBI inflation target by Jan 2016 - RBI deputy  Full Article 

International Exchange

International Exchange

NSE plans to set up international exchange in Gujarat  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage