By Cherian Thomas and Anand Krishnamoorthy
New Delhi: India’s government plans to raise compensation by 2% to state-run refiners for subsidizing kerosene and liquefied petroleum gas, used as cooking fuels.
India will spend Rs28.4 billion on compensation in the year starting 1 April compared with Rs27.85 billion a year ago, Finance Minister P Chidambaram said in New Delhi today while presenting his budget.
Indian Oil Corp., the nation’s largest refiner, and its state-run counterparts are barred from raising fuel prices in line with crude oil costs to control inflation. Prime Minister Manmohan Singh, facing political pressure over rising prices that are eroding the spending power of India’s poor, is under pressure to curb inflation, which has risen to a two-year high.
The finance ministry had earlier estimated oil subsidies to cost Rs30.8 billion this fiscal year before revising it down to Rs27.85 billion.
Crude oil surged to a record $78.40 a barrel on the New York Mercantile Exchange in July and traded at $60.26 a barrel today, 2% less than a year ago.