NEW DELHI - India Inc Wednesday welcomed the government’s decision to raise fuel prices, saying the move would help oil companies reduce their huge subsidy burden.

“With hike in prices of diesel and petrol, oil companies will be able to avoid red ink in their balance sheet as they were bleeding under the burden of subsidies, discounts and oil bonds,” Sajjan Jindal, president of the Associated Chambers of Commerce and Industry (Assocham), said in a statement.

The government Wednesday allowed state-run oil firms to increase prices of transport fuels, resulting in gasoline becoming dearer by Rs.4 per litre and diesel by Rs.2 per litre, following successive increase in global crude prices.

The chamber urged the government to “get out of fixing prices” of fuels, including kerosene and cooking gas, and leave it to the market.

Harshpati Singhania, president of the Federation of Indian Chamber of Commerce and Industry (FICCI), said the decision to raise fuel prices would have “major positive implication” for fiscal deficit management.

“The hike in oil prices should help in controlling oil subsidies.

This step will therefore have major positive implication for fiscal deficit management in 2009-10,” Singhania said.

The price hike will also have some impact on the price situation, he added.

The Confederation of Oil Industry (CII), another industry lobby, said the hike would add around 1.3 percent to inflation.

CII president Venu Srinivasan said the price hike was on expected line as the “WPI (wholesale price index) inflation is one of the lowest in a long time and the international crude prices have breached the $70 per barrel mark”.

Srinivasan has noted that while oil deficit is usually met by issuing oil bonds, this is one way of pushing today’s liabilities to the future and holding a large “off-balance sheet” deficit, which is not in the interest of the overall fiscal health of the country.