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Monday, 1 April, 2002, 10:47 GMT 11:47 UK
India ends oil subsidies
Indian truck driver
The government hopes petrol prices will not rise too much
India has abolished state price controls on its $15bn oil and refining industry, allowing companies to set-up their own petrol stations.

State subsidies have been lifted on all petroleum products, except some household necessities such as kerosene and cooking gas which the government will continue to subsidise.

Any oil company - including foreign giants such as Shell or ExxonMobil - can now operate retail outlets provided they commit to investing 20bn rupees (287.9m) over 10 years.

Petroleum minister Ram Naik said he did not expect domestic prices to rise and that the government would still have the option of cutting taxes to keep down prices.

Liberalised oil

"I feel there should be stability in prices in the interest of consumers," Mr Naik said.

Most of the companies selling petroleum products in India are state-controlled and it was unlikely they would burden consumers by suddenly increasing prices, he said.

Subsidies on kerosene and cooking gas would be phased out in three to five years, he added.

Oil subsidies have weighed heavily on the Indian budget and government attempts to contain a soaring fiscal deficit, estimated at 5.7% of gross domestic product.

With India importing nearly 70% of its oil, global price rises have put a severe strain on the finances of the government.

The BBC's Sanjeev Srivastava in Bombay
"If there are swings in prices, they will be relatively minor."
See also:

28 Feb 02 | South Asia
India unveils annual budget
26 Feb 02 | Business
India's deficit weighs on economy
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