India raises gas prices as much as 7%

India's cabinet raised gasoline and diesel prices by as much as 7.0 percent yesterday to offset higher international oil prices since the last hike in November last year, a federal minister said.

"The cabinet today decided to increase the price of petrol by 2.50 rupees and diesel by 2.0 rupees ... effective from midnight," Information and Broadcasting Minister Jaipal Reddy told reporters.

The price of gasoline will rise 6.5 percent to 40.49 rupees per liter in the capital New Delhi while diesel will cost 7.0 percent more at 28.45 rupees.

"These decisions were taken after wide consultations following a sharp rise in the price [of crude oil] at the global level," Reddy said.

The government however declined to raise the price of kerosene, a fuel used widely by poor households for cooking, Reddy said.

India more than 70 percent of its oil needs with the import bill soaring 40 percent for the year ended March to US$27.20 billion.

Yesterday, oil prices rose further into record high territory to top US$59 a barrel in early Asian trade before easing slightly.

The government has avoided increasing oil prices since last year because of opposition from the communist allies it depends upon for crucial support. The communist parties yesterday threatened to hold a nationwide protest over the hike.

Oil in India has been steadily increasing in the rapidly-growing economy as industries have stepped up production and automobile ownership grows.

The hike in oil prices could stoke inflation, which hit a 13-month low this month at 4.22 percent, after soaring to a three-and-a-half year high above 8 percent last year.