In India and Malaysia fears are mounting of major price hikes and public protests after their respective governments cut public subsidies that kept fuel prices low.
In India petrol and diesel prices rose by about 10 per cent, with the price of cooking gas jumping by 17 per cent. Still local prices are far below market levels. Indeed Indian Petroleum Minister Murli Deora said diesel prices must double and petrol must increase by 50 per cent.
For experts the measure is “necessary”. They estimate that India’s three largest oil companies lost about US$ 17 billion because of selling at under the market rate to consumers. What is more the companies told the government that if they were not allowed to raise prices, they would lose almost US$ 58 billions this fiscal year or 3 per cent of the Gross Domestic Product (GDP).
With inflation reaching 8 per cent in recent weeks, the highest since 2004, fears are growing that prices might rise even further, especially since India imports nearly 75 per cent of its crude oil requirements.
The Indian rupee is one casualty of the current economic woes. After gaining 12.3 per cent in 2007, it lost 7.9 per cent this year (one of the worst performances among Asian currencies), closing at 42.7775 per dollar yesterday.
In Malaysia petrol prices rose by 41 per cent. The government is expected to bring local prices into line with those of the market by August; should it not do so subsidies might end up representing nearly a third of total government spending or about 7 per cent of the GDP.
Taiwan, Sri Lanka, Pakistan, Bangladesh and Indonesia have already had to cut fuel subsidies. (PB)
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