NEW DELHI: The Indian government came under intense pressure on Thursday from within the ruling coalition and protesters to roll back the steepest petrol price hike in the country's history, less than 24 hours after it took the unpopular decision cheered by investors.
There had been signs that the beleaguered government was preparing to take the bolder step of cutting subsidies on other fuels weighing on its budget deficit, but after a day of uproar over petrol prices, an imminent move looked unlikely.
State oil companies announced on Wednesday they would raise the price of petrol by about 11 percent, the first increase in six months, as they sought to recover growing losses from higher global oil prices and a plunging rupee that again hit a historic low to the dollar during the day.
India's main stock index rose 1.8 percent on hopes the petrol price rise would be followed by similar increases in other fuels, such as diesel. The rupee also recovered to 55.76 from a low of 56.40 against the dollar.
But protesters in the states of Andhra Pradesh, Bihar, Odisha, Jammu and Kerala burnt effigies of Prime Minister Manmohan Singh, set motorcycles on fire and held placards reading "Bring down petrol prices".
In some areas, likenesses of Sonia Gandhi, the leader of the Congress party that heads the ruling coalition, were also set ablaze.
Petrol, or gasoline, is not subsidised by the government, but state refiners, which dominate the market, had kept prices on hold despite an increase in crude prices. Diesel, kerosene and liquid petroleum gas, fuels used by the poor and in public transport, are heavily subsidised and make up a hefty portion of the ballooning fiscal deficit.
Economists cheered the petrol increase, saying it showed the embattled coalition, paralysed for months by infighting and indecision, was finally taking action to rein in ballooning trade and fiscal deficits.
Adding to the sense of new momentum, a Finance Ministry official said a group of government ministers led by Finance Minister Pranab Mukherjee would meet on Friday to discuss the possibility of raising the price of diesel.
India has not raised diesel prices since July 2011.
But by the afternoon, as news of the protests spread, the Finance Ministry official was casting doubt on Friday's diesel price meeting, saying the political backlash was forcing a rethink.
"The increase in diesel price may aggravate the situation," the official said, speaking on condition of anonymity because of the sensitivity of the issue. A second official confirmed the meeting might not take place as scheduled.