India seeks to reassure markets on deregulation of fuel prices
There is no going back on deregulation of oil prices: Finance minister Arun Jaitley in a Facebook post
New Delhi: India on Saturday sought to assure investors that the government would not go back to regulating fuel prices, a day after oil company shares tumbled on concerns about a return to a regime that has hurt their profits in the past.
The government said on Thursday it was cutting gasoline and diesel by Rs 2.50 per litre to help Indians struggling to pay fuel prices that had climbed on the back of a rise in global crude prices and a weakening rupee.
The move was seen as a reversal of a 2014 decision to scrap regulated fuel prices — a regime that was blamed for deterring state oil marketing firms from expanding and for choking off investment in domestic oil fields by India’s biggest oil producer.
“Let me categorically assure all that there is no going back on deregulation of oil prices,” India’s finance minister Arun Jaitley said in a Facebook post on Saturday.
The government freed up the price of diesel in October 2014 after a decade of regulation, saying it would encourage competition among vehicle fuel retailers and enhance efficiency in oil company services. Petrol prices were freed up by the former government of the Congress party in 2010.
The price cut reduced the government’s excise duty by Rs 1.50 per litre and cut Re 1 per litre on the amount charged by state-run oil marketing firms Indian Oil Corp , Bharat Petroleum Corp and Hindustan Petroleum Corp.
Shares in the companies fell more than 20% to multi-year lows on Friday before recovering marginally.