India announes hikes on petrol and diesel prices

From midnight, petrol will cost four rupees (eight US cents) more per litre while diesel will cost two rupees extra, Oil Minister Murli Deora said.

Petrol prices in New Delhi on Wednesday stood at 40.62 rupees (0.85 dollars) and diesel at 30.86 (0.64 dollars), while volatile global crude prices touched just over 71 dollars.

The government last year twice raised fuel prices, in February and June, stirring widespread political anger and worries about higher inflation.

A drop in crude prices towards the end of 2008 allowed the government to roll back some of the increase in December, but Deora said fresh volatility in the international price had forced the government's hand again.

"The government hopes that the people will understand the circumstances under which it has become painfully necessary to make these adjustments," said Deora.

Kerosene prices, known as the "poor man's fuel," were left unchanged, as was the cost of liquefied petroleum gas (LPG) cylinders, also used for cooking.

The federal cabinet gave oil firms permission to raise fuel prices, to bring them closer in line with rising world prices and curb losses at state-run oil companies, which are losing up to 35.4 million dollars a day.

"In view of the increase in the price of crude oil by about 75 percent, the under-recoveries of oil marketing companies have reached a level where it has become inevitable to revisit the prices," Deora said.

India imports about 70 percent of the oil it consumes and has accumulated a huge burden of subsidies as it kept prices artificially low when crude soared to its peak last year.

Oil prices are a politically sensitive issue, with previous hikes leading to nationwide protests and strikes.

India's Congress Party will next week present its first budget after being swept back to power in May on promises of alleviating poverty and working for the "aam admi," or common man.

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