NEW DELHI, 4 November 2004 — India’s Cabinet said yesterday it would decide whether to raise domestic oil prices within the next two days in the face of rising international oil prices.
India’s Congress-led coalition government has kept a lid on domestic oil prices to check inflation but state-owned oil firms which buy oil from overseas to meet domestic demand have been forced to absorb the price difference.
Finance Minister Palaniappan Chidambaram said the decision was postponed as two key Cabinet members were unable to attend the Cabinet meeting yesterday.
“Petroleum Minister Mani Shankar Aiyar made a detailed presentation (on whether to raise oil prices) but another Cabinet meeting will be held in 24 to 48 hours to decide on the issue,” Chidambaram told reporters.
The revenue losses suffered by the state-run oil companies have put pressure on the government’s budgeted spending, forcing it to review lifting the cap on domestic oil prices. India, which imports about 70 percent of its total oil consumption and is one of Asia’s largest oil consumers, raised domestic oil prices only once in June but global prices have risen sharply since then.
The government has been reluctant to raise fuel prices for fear of stoking inflation which has been running at between seven to eight percent for the past three months, mainly due to higher fuel and commodity prices, as well as increased food costs due to a patchy monsoon.
It also fears that higher fuel prices would hurt economic growth.
