Backlash after India hikes fuel prices

INDIA: India's government faced a growing backlash on Friday after hiking diesel 12 percent in a desperate bid to reverse its economic woes, as opponents said the move would stoke broader price rises.

Widely accused of policy paralysis, Prime Minister Manmohan Singh approved the rise at a cabinet meeting late Thursday despite protests from coalition allies and even an acknowledgment by his own Congress party that it would cause pain.

However newspapers said the move had become inevitable as state-run refiners had been incurring massive losses as a result of government price controls.

India buys in around 80 percent of its oil needs and the import bill has risen dramatically because of high global prices and a plunging rupee.

The move, which came into effect at midnight, means a litre of diesel will now cost an extra five rupees. The price of a litre in New Delhi had stood at 41.32 rupees (74 US cents) a litre. The price of kerosene, used extensively by the poor, was left unchanged, as was the cost of liquefied petroleum gas (LPG) cylinders, also used for cooking, but oil ministry officials said cooking gas bottles would now be rationed.

The Trinamool Congress, a key ally of Singh's multi-party administration, was the first to denounce the increase.

“We will not accept it and demand its rollback,” said party president Mamata Banerjee, who is also chief minister of West Bengal state.

India's main opposition Bharatiya Janata Party (BJP) also hit out at the rise.

“The diesel hike will have a cascading effect and prices of all essential things will go up,” said Narendra Modi, chief minister of Gujarat and a senior BJP figure.

The general secretary of the main governing Congress party, Digvijay Singh, also voiced fears that the rise could “hurt the farmers and common man”. AFP