News / Asia

India Rules Out Diesel, Kerosene Price Hike

An employee fills diesel in a public bus at a fuel station in Kolkata, August 13, 2012.
An employee fills diesel in a public bus at a fuel station in Kolkata, August 13, 2012.
Anjana Pasricha
India has ruled out hiking the price of diesel, kerosene and other subsidized petroleum products for now. The government is under pressure to raise oil prices to reduce its massive fiscal deficit, but fears a populist backlash. 

Suvikrant Maira, 35, is a private sector executive working in the booming business hub of Gurgaon. He prefers to run a car which uses diesel.

“Honestly its about economy, when you have outstation trips you want to make, petrol usually does not make economic sense there,” he said.

Diesel costs 40 percent less than gasoline. Diesel's price is heavily subsidized because it is used by the transport sector - trucks and buses. The government also subsidizes the price of cooking gas and kerosene.

Oil Minister Jaipal Reddy said Friday state-run oil companies are suffering billions of dollars in losses due to the subsidies. But he is ruling out an immediate price hike.  

“We are of course facing a tremendous crisis of unprecedented magnitude. However there are no immediate plans [to raise prices],” he said.

The oil subsidies have increased hugely as energy consumption has risen in recent years. The finance and oil ministries have long advocated slashing fuel subsidies, particularly on diesel, to control the government’s fiscal deficit.

Officials point out that the consumption of diesel is not restricted to the transport sector. In recent years, it has also increased hugely among the middle and upper income groups, who do not need the subsidies.

Diesel is also used by private businesses and individuals to fuel generators, which are not uncommon in a country where power cuts have become the norm.     

But observers say the government, already under pressure from growing corruption scandals, is concerned about a popular backlash if the prices of diesel and kerosene are raised.

The Congress Party-led government is also under pressure from its coalition partners. They fear an increase will raise freight rates and fuel inflation in a country where rising prices are already a concern. 

However, economists warn that the implications of not slashing oil subsidies could be serious. Global ratings agencies have warned India of losing its investment grade status if it does not control its fiscal deficit.       

D.H. Pai Panandiker, the head of the New Delhi-based economic policy institute, RPG Goenka Foundation, says the subsidy on diesel and cooking gas is a huge strain on government finances.  

"It is hurting India’s economy in a major way. And if that [eliminating subsidies] is not done then the budget deficit will shoot up and the possibility of any improvement in investment is not there. So, it can make a lot of difference to growth going up or going down," he said.

Economists say new investment is urgently needed to give fresh momentum to an economy which has slowed to 5.5 percent compared to 8 percent a year ago.

You May Like

Ukraine Purges Interior Ministry Leadership With Pro-Russian Ties

Interior Minister Avakov says 91 people 'in positions of leadership' have been fired, including 8 generals found to have links to past pro-Moscow governments More

US Airlines Point to Additional Problems of any Ebola Travel Ban

Airline officials note that even under travel ban, they may not be able to determine where passenger set out from, as there are no direct flights from Liberia, Guinea or Sierra Leone More

Nigerian President to Seek Another Term

Goodluck Jonathan has faced intense criticism for failing to stop Boko Haram militants More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Talks to Resume on Winter Gas for Ukrainei
X
Al Pessin
October 25, 2014 4:21 PM
Ukrainian and Russian officials will meet again next week in an effort to settle their dispute over natural gas supplies that threatens to leave Ukraine short of heating fuel for the coming winter. VOA’s Al Pessin reports from London the dispute is complex, and has both economic and geopolitical dimensions.
Video

Video Talks to Resume on Winter Gas for Ukraine

Ukrainian and Russian officials will meet again next week in an effort to settle their dispute over natural gas supplies that threatens to leave Ukraine short of heating fuel for the coming winter. VOA’s Al Pessin reports from London the dispute is complex, and has both economic and geopolitical dimensions.
Video

Video Smugglers Offer Cheap Passage From Turkey to Syria

Smugglers in Turkey offer a relatively cheap passage across the border into Syria. Ankara has stepped up efforts to stem the flow of foreign fighters who want to join Islamic State militants fighting for control of the Syrian border city of Kobani. But porous borders and border guards who can be bribed make illegal border crossings quite easy. Zlatica Hoke has more.
Video

Video China Political Meeting Seeks to Improve Rule of Law

China’s communist leaders will host a top level political meeting this week, called the Fourth Plenum, and for the first time in the party’s history, rule of law will be a key item on the agenda. Analysts and Chinese media reports say the meetings could see the approval of long-awaited measures aimed at giving courts more independence and include steps to enhance an already aggressive and high-reaching anti-corruption drive. VOA’s Bill Ide has more from Beijing.
Video

Video After Decades of Pressure, Luxembourg Drops Bank Secrecy Rules

European Union finance ministers have reached a breakthrough agreement that will make it more difficult for tax cheats to hide their money. The new legislation, which had been blocked for years by countries with a reputation as tax havens, was approved last week after Luxembourg and Austria agreed to lift their vetoes. But as Mil Arcega reports, it doesn’t mean tax cheats have run out of places to keep their money hidden.
Video

Video Kobani Refugees Welcome, Turkey Criticizes, US Airdrop

Residents of Kobani in northern Syria have welcomed the airdrop of weapons, ammunition and medicine to Kurdish militia who are resisting the seizure of their city by Islamic State militants. The Turkish government, however, has criticized the operation. VOA’s Scott Bobb reports from southeastern Turkey, across the border from Kobani.
Video

Video US ‘Death Cafes’ Put Focus on the Finale

In contemporary America, death usually is a topic to be avoided. But the growing “death café” movement encourages people to discuss their fears and desires about their final moments. VOA’s Jerome Socolovsky reports.
Video

Video Ebola Orphanage Opens in Sierra Leone

Sierra Leone's first Ebola orphanage has opened in the Kailahun district. Hundreds of children orphaned since the beginning of the Ebola outbreak face stigma and rejection with nobody to care for them. Adam Bailes reports for VOA about a new interim care center that's aimed at helping the growing number of children affected by Ebola.

All About America

AppleAndroid