India raises gasoline price to stem falling currency

Controversial move, intended to stem falling currency, seen as likely problem for Prime Minister Manmohan Singh’s government.

NEW DELHI — Struggling with a sinking rupee and rising fiscal deficit, India announced a roughly 10 percent hike — the country’s steepest ever — in the price of gasoline Wednesday, prompting anger across the political spectrum.

State-owned oil companies, which are saddled with huge losses because the government requires them to sell fuel at subsidized rates to protect the poor, announced that gas prices across the country would rise by an average 50 cents a gallon. They have been prohibited from raising prices since November because the government feared a public backlash in state elections earlier this year.

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The hike brings India’s fuel price into parity with international prices and also addresses the severe devaluation of the currency in recent weeks.

But the decision, coming amid spiraling food-cost inflation, is likely to create more problems for Prime Minister Manmohan Singh’s beleaguered coalition government, which completed three years in power on Tuesday.

Although many economists welcomed the price correction as long overdue, Singh’s allies immediately demanded a reversal and threatened street protests.

Mamata Banerjee, West Bengal’s chief minister and a senior coalition ally, called the move “unjust and unilateral” and issued a thinly veiled threat.

“Do not take me for granted,” she told the government. “This will create political instability. You are passing on the burden of your economic mismanagement to the common man.”

Opposition party lawmaker Prakash Javdekar said “people will not and cannot tolerate this.”

The government did not, however, raise the price of diesel, known as the common man’s fuel in India because truckers use it to transport vegetables and other goods.

 
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