The Indian government on Sunday announced it would keep the retail cost of petrol and diesel steady despite rising global crude oil prices, an official said. "After weeks of uncertainty, it has now become clear that there will be no change in the price of diesel and petrol," a spokesman for the state-run Indian Oil Corporation told reporters.
The announcement followed a flurry of weekend meetings between Prime Minister Manmohan Singh, Petroleum Minister Mani Shankar Aiyar and top state-run oil firm executives.
India's new Congress-led coalition government has been trying to keep a cap on inflation in the face of rising global oil prices, a crucial issue in a country which imports about 70 percent of its energy requirements.
The government has agreed to absorb spiralling global oil prices by cutting customs duty on petrol and diesel to 15 percent from 20 percent and slashing the excise duty on petrol in a bid to control inflation, according to sources in the finance ministry.
These measures will cost the government more than 25 billion rupees (543.47 million dollars) in the 2004-2005 fiscal year, the sources said.
High global prices nudging 52 dollars a barrel have done little to ease India's demand for global crude and its oil import bill is expected to rise 50 percent to 27 billion dollars this fiscal year.
Increased fuel subsidies could hit government hopes of cutting its fiscal deficit to 4.4 percent of gross domestic product this year from last year's 4.8 percent.
The Press Trust of India news agency said Sunday that state-run oil firms had lost up to 36.46 billion rupees in the first seven months of fiscal 2004-2005 by selling petrol and diesel below their imported cost.
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