NEW DELHI. Feb 1: The Indian government yesterday announced a steep increase in the price of cooking gas as it naled out a roll back in subsidy cuts on foodgrains and fertiliser to contain a ballooning fiscal deficit, reports AFP.

A government statement said the prices of liquefied petroleum gas had been increased by more than 11 per cent and "the subsidy per cylinder has been cut by 10 rupees (23 US cents).

"Even after the (price increase) subsidy to the consumer is estimated to be GO rupees per cylinder, the statement said, a cooking gas cylinder in the capital New Delhi costs 13G rupees.

Earlier. Finance Secretary Vijay Kelkarsaid the price increases announced last week on foodgrains and fertiliser price

increases announced last week on foodgrains and fertiliser were anti-inflationary' and there is a need to cut subsidies which have reached an 'unsustainable level.'

'The cut in subsidy will send right signals to the market. There is no question of a rollback." Kelkar told reporters.

The Indian government, facing a mounting financial crisis, last week decided on the subsidy cuts in a bid to save 50 billion rupees (1.2 billion dollars) to help reduce the huge fiscal deficit.

Prices of foodgrains sold through the public distribution network shot up between 30 and 80 per cent and the price of urea fertiliser rose 11 per cent.

The opposition as well as government allies lashed out at

the Hindu nationalists calling the move an assault on the millions of poor in the country.

The Telugu Desam party, which backs the ruling coalition from the outside, said it might withdraw legislative backing to the minority government.

Kelkar, however, defended the price increases saying it would not fuel inflation.

"Though the increase in prices of foodgrains will push up the inflation rate by 0.2 per cent, it real terms it would come, down due to reduction in fiscal deficit.

"The rule of thumb is that one per cent reduction in fiscal deficit would lead to a two per cent reduction in inflation. Kelkar said.

Kelkar. the top bureaucrat in

the finance ministry, said the price increase would cut the fiscal deficit by about 904 million dollars in a year.

India's fiscal deficit is about six per cent of the gross domestic product and some trade bodies have put the figure at seven percent.

'The hike has been resorted io at a time when the inflation rate was also at a low 4.4 per cent to ensure lhat the impact was minimal. Kclkar said.

Kelkar admitted the Indian goveniment would not be able to contain the fiscal deficit at its targeted 5.6 per cent of GDP.

He •said lota! governmept borrowings, lor the 10 months to January of fiscal 1999 which ends in Match had shot up by around three per cent from New Delhi's target to 19 billion dollars.