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India gov't faces heat after raising diesel prices

Associated Press Modified: September 14, 2012 at 6:46 am •  Published: September 14, 2012

NEW DELHI (AP) — India's beleaguered government faced angry protests from its political allies as well as the opposition Friday after it raised the price of diesel fuel in a bid to curb a ballooning national deficit.

The government raised the price of diesel by five rupees (10 cents) a liter late Thursday. The price of diesel is regulated and kept much lower than gasoline prices in India. But the government has been under intense pressure to reduce its fiscal deficit by cutting spending for subsidies, particularly on fuel.

The subsidy reduction is part of the government's economic reform program. The delay in those reforms has been blamed in part on a sharp drop in India's growth rate and the rapid fall in the value of the rupee.

Concerned by India's massive subsidy bill, ratings agencies have threatened to downgrade India.

The government has also announced a reduction in cooking gas subsidies. The price of diesel — important for farmers' irrigation pumps and tractors, as well as trains and buses — is politically sensitive in India and both opposition politicians and coalition allies criticized Thursday's decision.

"It will affect the farmer, it will affect the common people," West Bengal Chief Minister Mamata Banerjee told CNN-IBN television channel. She demanded that the government withdraw the hike.

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