India rules out night-time fuel pump shutdown

A no petrol sign outside a fuel station in India Fuel demand in India has risen in recent years as its economy has expanded

Related Stories

India is not considering a proposal to shut fuel pumps at night as it looks at ways to cut its oil import bill, Oil Minister Veerappa Moily has said.

Earlier reports quoted Mr Moily as saying it was one of the options the government was mulling.

India's oil imports are one of the biggest contributors to its widening current account deficit.

Mr Moily said his ministry would also launch a conservation drive later this month to try to cut fuel demand by 3%.

"This proposal [to shut fuel pumps at night] is not under the consideration of the government," Mr Moily told reporters on Monday.

The minister said the proposal did not come from the government, but from "[the] public and others".

"We are toying with the ideas [on conserving fuel] that have come to us. That doesn't mean we have accepted them or are enforcing shutdowns," he said.

Earlier, India's opposition had criticised Mr Moily after reports quoted him saying over the weekend that shutting the pumps was one of the proposals that the government was considering to cut demand and save an estimated 160bn rupees ($2.4bn; £1.6bn) in foreign exchange outflow from the country.

"Won't the people fill their car fuel tanks in the morning? This is a strange move," the Press Trust of Indian news agency quoted Shahnawaz Hussain, the spokesman for the Bharatiya Janata Party (BJP), as saying.

'Strange move'

India has been struggling to contain its current account deficit - which is the broadest measure of a country's overall trade.

Start Quote

Instead of running around and coming up with the short term solutions like shutting down pumps at night - the government needs to bite the bullet and lift all unnecessary subsidies”

End Quote Nitin Pai Takshashila Institution

A deficit occurs when a country's import bill exceeds its earnings from exports and a widening deficit puts strain on the country's foreign exchange reserves.

In India's case, the deficit hit a record high of 6.7% of gross domestic product (GDP) last year, prompting calls for policymakers to take steps to contain it.

The sharp decline in India's currency, which has dipped almost 20% against the US dollar this year, has only complicated the situation.

India has taken some measures to try to tackle the issue.

Last week, the central bank said that it would sell dollars to three state-run oil firms in an attempt to stem the decline in the rupee.

Global oil contracts are mostly settled in US dollars. As a result, Indian oil firms need to sell rupees to buy dollars to pay for imports.

The central bank's decision is expected to take the bulk of their dollar demand, estimated to be around $300m (£190m) per day, away from the foreign-exchange market and help support the rupee.

It has also raised the import duty on gold - another key contributor to the deficit - three times this year to try to curb imports of the precious metal.

Subsidy impact

India imports nearly 80% of all its fuel requirements.

However, the government subsidises fuel prices, including those of diesel, cooking gas and kerosene, to help the poor and keep inflation in check.

A protest sign outside a fuel pump in India Fuel price are a sensitive issue in India and price rises have previously triggered protests

But the policy has resulted in a growing deficit, and there have been concerns that it may be hurting India's overall economic growth.

India's total fuel-subsidy bill for the financial year to 31 March 2013 was 1.6tn rupees.

As a result, there have been calls for the government to scale back the programme and bring down the deficit.

Some analysts said that, given the current situation, policymakers needed to act quickly and make tough choices.

"These fuel subsidies usually go to the segment of the population that is not needy," said Nitin Pai, director of Takshashila Institution, a Bangalore-based independent think tank.

"The primary reason they are being continued is to prevent an outcry in the country and keep the middle class happy.

"Instead of running around and coming up with the short-term solutions like shutting down pumps at night - the government needs to bite the bullet and lift all unnecessary subsidies," he added.

More on This Story

Related Stories

More Business stories

RSS

Features

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.