State-run oil firms will raise petrol prices by nearly 5 percent from Friday, a move that eases their subsidy burden but adds pressure to stubbornly high inflation in Asia's third-largest economy.
Economists put the overall inflationary impact of the petrol price increase at between 4 and 15 basis points.
Petrol is less widely used in India than diesel, and accounts for just 1.09 percent of the wholesale price index, the country's main inflation indicator, while diesel has a weight of 4.67 percent.
Headline inflation in India rose to 9.78 percent for August, data on Wednesday showed, its highest in 13 months, adding to expectations that the Reserve Bank of India (RBI) will raise interest rates on Friday for the 12th time since March 2010.
Indian Oil Corp has lost 11.5 billion rupees ($241.4 million) thus far in the fiscal year that began in April on petrol subsidies, Chairman R.S. Butola told local media.
Nitesh Ranjan, an economist with Union Bank of India, said the impact of the petrol price increase would be minimal and is positive from the RBI's perspective.
"In tackling inflation, fiscal policy actions need to be in consonance with the monetary policy, else fiscal deficit will counter the moderating trend in aggregate demand," he said.
RBI Governor Duvvuri Subbarao has repeatedly called on New Delhi to improve its fiscal position in order to help manage inflation over the longer term.
"Considering the government's rhetoric and today's move, odds for a pause in policy rate has increased," Ranjan said.
Oil companies in India have been free since June 2010 to set their own prices for petrol, which is considered a rich person's fuel in India, and state companies tend to raise their prices in tandem.
The price of diesel, which is widely used in agriculture and industry, remains set by the government, as are prices for cooking fuels.
The increase in price to about 66.5 rupees per litre comes after a record 5 rupee hike in May.
($1 = 47.640 rupees)
Hindustan Petroleum Corp Ltd, Bharat Petroleum Corp Ltd and Indian Oil Corp all said they will increase their petrol prices by 3.14 rupees per litre.
Economists put the overall inflationary impact of the petrol price increase at between 4 and 15 basis points.
Petrol is less widely used in India than diesel, and accounts for just 1.09 percent of the wholesale price index, the country's main inflation indicator, while diesel has a weight of 4.67 percent.
Headline inflation in India rose to 9.78 percent for August, data on Wednesday showed, its highest in 13 months, adding to expectations that the Reserve Bank of India (RBI) will raise interest rates on Friday for the 12th time since March 2010.
Indian Oil Corp has lost 11.5 billion rupees ($241.4 million) thus far in the fiscal year that began in April on petrol subsidies, Chairman R.S. Butola told local media.
Nitesh Ranjan, an economist with Union Bank of India, said the impact of the petrol price increase would be minimal and is positive from the RBI's perspective.
"In tackling inflation, fiscal policy actions need to be in consonance with the monetary policy, else fiscal deficit will counter the moderating trend in aggregate demand," he said.
RBI Governor Duvvuri Subbarao has repeatedly called on New Delhi to improve its fiscal position in order to help manage inflation over the longer term.
"Considering the government's rhetoric and today's move, odds for a pause in policy rate has increased," Ranjan said.
Oil companies in India have been free since June 2010 to set their own prices for petrol, which is considered a rich person's fuel in India, and state companies tend to raise their prices in tandem.
The price of diesel, which is widely used in agriculture and industry, remains set by the government, as are prices for cooking fuels.
The increase in price to about 66.5 rupees per litre comes after a record 5 rupee hike in May.
($1 = 47.640 rupees)
