The Week in Review for 25 June 2010

The Week in Review for 25 June 2010

Prepare to pay more at the pump. On Friday a group of ministers decided to free up petrol prices and increase the prices of other fuels. Petrol prices are now free of government subsidies and are up by Rs3.50 per litre. Diesel prices have increased by Rs2 per litre. And even kerosene, used by India’s poor, will see a price rise of Rs3 per litre. Also significantly, cooking gas prices will go up by Rs35 a cylinder. Friday’s decision is likely to increase inflationary pressures, but it could help the government contain a fiscal deficit that’s now projected at 5.5% of GDP. The decision is also likely to make it easier for private companies like RIL and Essar Oil to start retailing fuels again.

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In other news, RIL and R N R L signed a gas supply master agreement on Friday. If it gets government approval, the pact will give RNRL access to gas from RIL. In a statement RNRL said it would seek what “expeditious allocation of gas". But it’s still not clear how much gas R I L will supply and when. Friday’s development was the latest in a series of understandings between the Ambani brothers. Last month they put an end to agreements that prevented them from competing with each other.

Also this week, Reliance Industries announced a major expansion of its US operations. The company said it would buy a 45% stake in an American shale gas field run by Pioneer Natural Resources. The deal is worth $1.32 billion. In April, R L paid $1.7 billion to buy into an Atlas Energy field in the US.