The government has stopped state firms from building new fuel stations for two years to cut costs at companies losing heavily from having to sell fuel at prices far below market rates, an oil ministry source said on Monday.
In June, the government raised petrol and diesel prices by about 10 percent, its biggest increase in 12 years, but the hike lagged far behind the the recent rally in crude oil prices, which soared to a record above $147 a barrel on Friday.
"The petroleum secretary has asked (state) oil firms to immediately stop setting up new retail outlets for two years," the official, who did not wish to be identified, said.
Only those new stations in an advanced state of construction could be completed, he added.
Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp are losing millions of dollars a day, as they sell fuels at low prices set by the government to help protect the poor and fight inflation.
Upstream companies and the government partly subsidise their losses, adding to the strain on public finances.
The official said state-firms had expanded their retail network to compete with private firms like Reliance Industries and Essar Oil, but the latter have a negligible market share as they have to sell at sharply higher prices.
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