Page last updated at 18:09 GMT, Thursday, 14 February 2008

Indian motorists face dearer fuel

By Karishma Vaswani
Indian Business Correspondent, BBC News, Mumbai

New Delhi taxis
The Indian government subsidises fuel to keep inflation down

India has raised the prices of petrol and diesel for the first time in 20 months to help petrol dealers with sky-high oil prices.

The cost of petrol will increase by 2 rupees ($0.05), or 4.6% per litre, and diesel will rise by 1 rupee or 3.3%.

India spends billions of dollars subsidising fuel and the government has been reluctant to increase the price as the subsidies help keep down inflation.

Indian motorists enjoy some of the cheapest fuel in the world.

Motorists like Dina Vyas are not pleased about the latest increases.

She has been riding her motorbike in India for two decades now and has depended on the low cost of petrol.

"It will be very, very difficult. Other things will go up too - like rickshaws, buses, taxis because of these higher petrol prices."

"It really is going to be very hard for us to bear this cost," she said.

'Good thing'

But the decision to raise fuel prices has been welcomed by Indian oil companies.

They have not been allowed to pass on high oil costs to customers and as a result are losing around $50m a day.

"It is a good thing, its also logical," said Ravi Shinde, head of the Indian Petrol Dealers Association in Maharashtra.

He said that oil companies, "can not go on buying the oil at a higher cost and selling at a lower cost - that's not logical."

But low fuel prices are what millions of Indians, especially those who have been left out of the economic boom, count on.

With the government facing elections in a dozen states this year - the decision to hike the cost of fuel is a brave one.





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