India to scrap petrol subsidies

Image caption,
Indian motorists have enjoyed cheaper fuel prices thanks to state subsidies

The Indian government has opted to scrap its subsidy of petrol prices in an effort to cut its budget deficit.

Ministers also voted to raise the price of other fuels, including diesel and kerosene gas in an effort to raise money.

India's fiscal deficit is forecast to hit 5.5% of GDP by 2010-11.

But the move is likely to be politically unpopular, and there are concerns that higher fuel prices will lead to higher inflation.

Allowing the price of petrol to be decided by the market will add about 3.5 rupees (£0.05; $0.08) to the price of a litre of petrol, India's oil secretary Sthanunathan Sundareshan told reporters.

Diesel prices will be increased by 2 rupees a litre, and kerosene will be raised by 3 rupees.

Proposals to raise fuel prices have already met with protests, planned by opposition politicians.