India raises fuel prices

The Indian government announced that effective June 5 it would increase gasoil and gasoline prices by around 10% and LPG prices by around 17% in response to demands from state-run oil companies that have been suffering from massive losses on their oil products sales. But Petroleum Minister Murli Deora acknowledged that the hike was not sufficient to offset the rise in global crude oil prices, so the state-owned oil companies and the government would continue to absorb most of the under-recoveries on sales of gasoline, gasoil, LPG and kerosene. The government plans to issue oil bonds worth Rs946 billion (US$22.07 billion) in 2008-2009 to oil marketing companies, in another move aimed at sharing the burden of under-recoveries, Deora said. India’s state refiners and retailersIndian Oil Corporation, Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limitedhave been facing a liquidity crunch, as they retail gasoline, gasoil, kerosene and LPG at government-set prices, which are significantly below production costs. To ease the burden, the Reserve Bank of India, the country’s central bank, last month issued an order to commercial banks to raise its credit exposure limits for oil companies. (June 5, 2008)