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Last Updated: Monday, 5 June 2006, 14:56 GMT 15:56 UK
India increases price of petrol
Person using petrol pump
Fuel prices have been frozen in India for nine months
The Indian government has raised the price of fuel in the face of rising crude oil prices.

Petrol prices rose by 4 rupees to 47.49 rupees a litre ($1.04, 55 pence) and diesel by 2 rupees to 32.45 a litre.

India's state-owned fuel retail outlets say they are losing billions of rupees by subsidising the cost of petrol to help the nation's economy.

But the government held back from raising the price of kerosene, heavily used in poorer households.

Liquid petroleum gas prices also remained unchanged.

Experts fear a rise in fuel prices - which had been unchanged since September - could dampen demand for oil and stoke inflation in the country.

Import reliance

India imports around 70% of the oil it needs.

Rising crude oil prices have been weighing heavily on its state-owned businesses - such firms run 90% of the country's fuel retail outlets.

According to government estimates, state-run companies would have lost $16bn in the current fiscal year without any price rises.

The Indian Petroleum Minister, Murli Deora, said that the petrol and diesel increase was the "minimum possible hike" which the government could impose.

However many of India's left-wing parties, which are key allies of the central government, have said they would oppose any rise in prices.

Mr Deora said that he was confident the left parties would eventually support his measures.

The government also announced measures to ease the burden on oil firms, including cutting import duties on petrol from 10% to 7.5%.

It is to issue $6bn in bonds to compensate state oil firms, such as Indian Oil and Bharat Petroleum, for the losses they have suffered.

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