Retail prices of petrol and diesel in China have gone up by 1,000 yuan per ton since Friday, while kerosene for the civil aviation industry has been increased by 1,500 yuan per ton.

The Chinese government also announced that from July 1, prices of electricity – the production of which relies heavily on coal that is becoming increasingly expensive – for commercial usage would increase by an average of 0.025 yuan per kilowatt hour (kw/h) across the country, except in Tibet and some quake-hit areas.

These announcements by the National Development and Reform Commission (NDRC) came as the country was facing high inflationary pressure with the Consumer Price Index (CPI) hitting 7.7 and Producer Price Index (PPI) climbing to 8.2 in May.

NDRC said in a notice that a fuel price-hike was necessary to counter high global oil prices, as local oil companies and refineries suffered increased costs of production, and that led to some operations closing down or cutting outputs and affected supplies in the domestic market.

China has been imposing tight price controls on crucial commodities to tame inflationary pressure, but some companies have complained of huge loses due to such policies, as there existed a huge gap between domestic and global fuel prices. 

However, the closing price at the global oil market dropped sharply to 131.93 from 137.82 dollar per barrel just a day before China upped its fuel prices.

The NDRC also drew up measures to minimize impacts of fuel price-rises on the public, included subsidizing farmers and fishermen, especially for food-producing farmers, who would receive an additional five yuan for each mu (1/15 hectare) of land owned. 

Public transports in cities, inter-village buses, and taxi services would also be subsidized to ensure no increase in fares. Meanwhile, prices of liquid and natural gas would remain unchanged.

Moreover, city residents under the low-income protection scheme would receive additional 15 yuan of monthly allowance from July onwards, while their rural counterparts would see an additional 10 yuan.

As for higher electricity prices – which varies from place to places in China – the NDRC said it would help to ease cost pressure for power generation plants and to ensure sufficient supplies.

The price spike, however, would not be applicable to residential units, agricultural and fertilizer production companies for the time being. Three provinces – Sichuan, Shaanxi and Gansu – severely damaged in the May 12 earthquake would also be exempted.

In addition, the NDRC also announced temporary price intervention between June 19 and December 31 this year on coals intended for power generation.

The NDRC ordered that future loading prices of coal should be no higher than the ceiling price registered by transactions made on June 19.