NEW DELHI: India’s government cut retail petrol and diesel prices on Thursday, effective from midnight, in a move to control accelerating inflation.
Prices of petrol have been cut by 4.5 %, or Rs2 a litre, while diesel was trimmed by 3.2 % or Rs1 a litre, as calculated on the change in prices in New Delhi.
“The burden of this price reduction will be met partly by revenue and partly through oil bonds already approved by the government,” Oil Minister Murli Deora said.
Data released on Thursday showed India’s wholesale price inflation accelerated to an annual rate of 6.73 % in early February, its highest in more than two years, from an annual 6.58 % at the end of January.
The central bank raised the amount of cash that banks have to keep with it on deposit on Tuesday as a way of trying to curb inflation-fuelling credit growth.
“Given the fact that monetary policy action does not seem to be having the desired effect on controlling inflation, the government has to resort to measures such as cutting fuel prices,” said Indranil Pan, chief economist at Kotak Mahindra Bank.
“The move runs contrary to logic, given the fact that globally oil prices seem to have stabilised between $55-60 per barrel.”
The yield on the 10-year government bond fell 4 basis points to a low of 8.04% after news of the price cut.