India will order an across-the-board increase in the price of petroleum products to offset surging global oil prices and narrow a trade deficit, Indian cabinet ministers said Saturday.
Speaking to reporters after a cabinet meeting, Petroleum Minister Ram Naik said an announcement on the extent and timing of the hikes would be made at a later date.
But Naik said he informed Prime Minister Atal Behari Vajpayee's cabinet of a looming crisis because of rising fuel imports costs after global crude oil prices recently hit 10-year highs.
"We have no option but to increase prices of all the five products, but there will be no announcement on the price hike today," he said, referring to kerosene, diesel, cooking gas, petrol and aviation fuel which are widely used in India.
Meanwhile, Naik scotched speculation of a 15-30 percent increase in fuel costs Saturday, instead saying India would float oil bonds, reduce customs and excise duties, and hike prices to combat India's hefty oil import bill.
"It will be a mixture of all the three but a decision will be taken on what the mixture will be," Naik said, adding he has already asked Finance Minister Yashwant Sinha to reduce customs and excise on petroleum products.
Analysts have predicted a hike of between 10 and 15 percent.
"I will also appeal to the state governments to reduce sales tax by five percent on fuel and they must come forward and do it to help us offset the global prices," Naik said.
The price of oil on the international market has soared to 36 dollars a barrel over recent weeks, sending share markets and currencies around the world into a spin.
India revised the price of kerosene and cooking gas in March and diesel a year ago, so their prices are due to be revised, he added.
The petroleum minister also said he will place his arguments before a meeting of the coalition partners of premier Vajpayee's ruling National Democratic Alliance.
"We will discuss the growing oil pool deficit," Naik said of India's annual petroleum imports bill.
India's oil import bill topped 10.5 billion dollars for the financial year ending March 2000 and is expected to rise by about seven billion dollars for the year ending March 2001.
Briefing reporters after the cabinet meeting, Parliamentary Affairs Minister Pramod Mahajan described soaring global oil costs as "the third oil shock" and said it could force India's trade deficit to reach 2,400 billion rupees (5.3 billion dollars) by the end of March 2001.
India's trade deficit jumped by 26 percent in the first quarter of the current fiscal year to touch almost three billion dollars, partly on account of the petroleum imports.
India imports 73 percent of its petroleum needs, and the weakness of the rupee against the dollar, combined with the rising international oil price has hit government coffers hard.
Government minister Mahajan said the cabinet did not decide on the quantum of the oil price hike, adding it would be soon announced by Naik's ministry.
Petroleum products in India are heavily subsidized by the government and any increase in prices carries a heavy political risk.
Several governments have had their fingers burned by intense public protests that followed attempts to cut subsidy levels -- NEW DELHI(AFP)
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