India and Malaysia announced sweeping increases in fuel prices today, the latest in a wave of measures by Asian nations struggling to cope with the surging cost of oil.

Malaysian petrol prices will go up by 40 percent as the government removes controls to rein in the spiralling cost of subsidies, Prime Minister Abdullah Ahmad Badawi told a press conference.

India's government increased petrol prices by 11 percent and diesel by 9.4 percent, based on pump prices in the capital, to offset huge losses at state oil firms.

Taiwan and Indonesia have also been forced to take action recently as the price of crude has spiked living costs around the world, especially among the poor, triggering inflation fears and the potential for unrest.

Benchmark crude prices stormed past the 100-dollar mark for the first time at the start of the year, reaching a record US$135 in May, and today was still trading at around US$125 a barrel.

Yeah Kim Leng, chief economist with research firm Ratings Agency Malaysia, said governments needed to get prices and subsidies right.

"Although Asia is the fastest-growing region, the high growth is now being moderated by rising inflation," he told AFP .

"We think rising inflation, because of energy and commodity prices, will have a dampening effect in addition to other factors like the present global slowdown and global credit crunch."

India's state oil firms badly affected

Petrol currently costs RM1.92 a litre at the pump in Malaysia, making it among the cheapest in Asia.

Abdullah said the hike would see inflation rise as high as 5.0 percent this year, from just 3.0 percent in April.

India's left-leaning administration sets discounted fuel prices to shield the poor and help check inflation, currently at a near four-year high of 8.1 percent.

The government has been scouting for weeks for ways to bail out state oil firms which sell fuel at hugely discounted rates and are now reeling from the sharp rise in global crude.

But the administration, facing elections within a year and worried about a voter backlash, did not raise the price of kerosene, which is widely used by the poor for cooking.

"The government is committed to protecting the interest of the common man," Petroleum Minister Murli Deora said.

At the same time, it cut duty on petrol by one rupee a litre and abolished customs duty on crude oil imports.

Indian shares closed the day down 2.81 percent.

Taiwan up by 16%, Indonesia up by 30%

Last week Taiwan unexpectedly announced price hikes of up to 16 percent by the island's key state-owned petrol firm to combat hoarders.

Premier Liu Chao-shiuan said prices could rise again in July, as even last week's increase covered only 60 percent of the surge in crude.

In Indonesia, thousands of people have protested on the streets against a government decision there to hike fuel by around 30 percent, which President Susilo Bambang Yudhoyono said was needed to avoid an economic meltdown.

Even after the adjustment, Indonesians still enjoy some of the lowest fuel costs in Asia, but critics charge it is putting an unacceptable burden on the poor who are already struggling with rising food costs.

China, whose insatiable demand for oil is helping drive crude higher, has made it clear fuel costs will remain well below market rates.

It increased retail fuel prices by some 10 percent late last year, but the government continues to throw billions of dollars in subsidies at state-owned oil and gas company Sinopec.

In Japan, which does not operate subsidies, the average price of regular petrol topped a record 170 yen (US$1.62) a litre this week, the nation's Oil Information Centre said.

An official there warned it was likely to rise further this month.

- AFP