India deregulates petrol prices

NEW DELHI, June 25, 2010 (AFP) - India's government decided to deregulate petrol prices Friday in a bold economic reform that risks a popular backlash as the country struggles with double-digit inflation. The step, which will mean an increase in fuel prices, is part of efforts by the left-leaning Congress-led government to reduce a gaping budget deficit by reducing the massive subsidies it pays to state-run fuel companies.

"The price of petrol will be market determined," Oil Secretary S. Sundareshan announced, adding that petrol prices would rise by 3.5 rupees (seven cents) a litre and diesel prices by two rupees at midnight Friday.

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Diesel prices will also be deregulated but no time frame has been set, he said, adding that the government would keep its right to intervene if global crude prices soared.

The prices of cooking gas and kerosene -- known as the "poor man's fuel" -- will remain state-subsidised but also rise, a panel led by Finance Minister Pranab Mukherjee decreed.

Kerosene will rise by three rupees a litre and cooking gas by 35 rupees a cylinder.

The step drew praise from industry, which noted that state-run oil companies had been obliged to sell fuel at hefty