The Ministry of Finance said on Friday it had allocated 19.8 billion yuan (US$2.8 billion) in subsidies to groups and sectors that could be affected by fuel price hikes announced late on Thursday.

Of the total, which was earmarked on Thursday, 7.8 billion yuan will go to grain producers and 12 billion yuan will be set aside for taxis, urban and rural buses, and the fishery and forestry sectors, the ministry announced.

The move was intended to "effectively ease the cost pressure on some low-income groups and public service industries exerted by the fuel price adjustment," said the ministry.

It was part of the government effort to blunt the impact of a surprise increase of fuel prices, since inflationary pressure is already high.

China's benchmark gasoline and diesel oil retail prices were raised by 1,000 yuan per ton and that of aviation kerosene went up by 1,500 yuan per ton, effective on Friday, according to the National Development and Reform Commission (NDRC).

However, fares for passenger rail services, urban and rural public transport and taxis would be unchanged, said the commission.

Fuel prices have been a sensitive issue in China, where the prices of refined oil products have been held down by government controls amid the surging world crude price, for fear of worsening inflation.

The country has been battling a rising inflation index, which rose 7.7 percent in May year-on-year after touching a 12-year high of 8.7 percent in February.

When deciding to increase the average electricity tariff by 0.025 yuan per kilowatt-hour from July 1, the NDRC exempted urban and rural residents and sectors of farming and fertilizer production, as well as the quake-hit provinces of Sichuan, Shaanxi and Gansu.

The ministry said provincial governments must forward the subsidies to counties and cities within five days after receiving the funds.

It said it would launch inspections and publish information on the progress of the payments to "ensure the reform of the refined oil price mechanism is carried out smoothly."

(Xinhua News Agency June 20, 2008)