India shies from diesel hike, seeks $5 bln fuel savings

NEW DELHI Tue Sep 24, 2013 9:48pm IST

1 of 2. An employee fills an iconic yellow ambassador taxi with diesel at a fuel station in Kolkata June 24, 2011.

Credit: Reuters/Rupak De Chowdhuri/Files

NEW DELHI (Reuters) - The oil minister shied away from introducing comprehensive energy subsidy cuts on Tuesday, instead calling on his countrymen to embrace car pooling, buses and cycling as well as staggered working hours in a bid to curb fuel consumption.

The struggling Asian economy - the world's fourth-largest user of energy - is battling a weak rupee that has increased the price of oil products as economic growth has halved to 4.4 percent from the 8-9 percent seen in the boom years.

Delhi is also seeking to rein in a record current account deficit that is in part fuelled by energy imports. A falling rupee also boosts inflation and the wholesale price index measure of inflation, the benchmark for the country's central bank, rose to a six-month high of 6.1 percent in August.

M. Veerappa Moily told a news conference on Tuesday he hoped to save $5 billion from fuel conservation measures even as he shied away from substantial measures such as raising diesel and other fuel prices as the electoral cycle hots up with polls due to be held by May 2014.

"As of now there is no proposal to raise prices," Moily said, referring to diesel subsidy changes.

India, where energy consumption per person is among the lowest in the world, has little room to cut fuel use as it tries to power exports and agriculture.

Diesel accounts for more than 40 percent of fuel demand, or around 1.4 million barrels per day, the bulk of which is used by trucks, farmers and industry.

The $5 billion savings is part of a campaign outlined earlier this month to save up to $25 billion this year, although the weak Indian currency and rising global oil prices already mean that rupee price hikes for diesel have failed to match the dollar price gains for oil.

The government realistically aims to save about $12-15 billion, a source familiar with the plans told Reuters after Moily's press conference.

INFLATION WORRY

"The biggest concern right now is inflation. Any kind of fuel hike will trigger an upside on inflation, so what they are trying to do is appealing to the people to sort of cut down on consumption," said Praveen Kumar, who leads the South Asia oil and gas research team at FGE in Singapore.

Moily was widely ridiculed for earlier plans to close petrol stations at night in a bid to curb demand, a plan that has been quietly dropped.

Instead Moily said on Tuesday he had requested "staggered office timings for government offices, which will help in decongesting road traffic" and issued a plea for Indians to drive safely, share cars and use public transport.

"We need to do more to conserve fuel or face tougher choices such as steep price increases or even quantitative restrictions," he said.

A plea for safer, more fuel conscious driving in a country whose choked city roads and highways saw 138,258 people die in accidents in 2012, according to government data, looked set to fall on deaf ears.

Moily on Tuesday called on public sector workers to use the bus one day a week and proposed a "free cycle scheme" to get Indians on their bikes on the country's potholed roads.

A television campaign featuring star batsman Virat Kohli will seek to educate India's drivers to "avoid frequent application" of brakes and "avoid riding the clutch."

Despite the energy conservation measures, Kumar at FGE said he expected Indian diesel consumption growth for the 2013/14 fiscal year to be "somewhere between 3.5 and 4 percent," from a year earlier.

(Writing by David Chance; editing by Jo Winterbottom and James Jukwey)

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