India tightens its belt after costly duty cuts

India moved to soften the fiscal impact of cuts to oil and fuel import duties by trimming US$1.4 billion from non-essential spending, austerity moves the prime minister called a “moral duty”. After 10 days of debate, the communist-backed coalition on June 4 agreed to raise state-set petrol and diesel prices by about 10%, more than expected, to help curb losses at its state-owned refiners. But it also scrapped import duty on crude oil to support refining and retailing firms such as Indian Oil Corp., Bharat Petroleum Corp. and Hindustan Petroleum Corp. at a cost of about US$5.3 billion. “In the context of the continuous rise in global crude oil and commodity prices, there is tremendous pressure on government resources,” Expenditure Secretary Sushama Nath told reporters, adding the new measures would promote fiscal discipline. Prime Minister Manmohan Singh urged his council of ministers to undertake austerity measures in the wake of rising crude oil prices. (June 5, 2008)