Pradip Gyawali, the tourism minister, said on Sunday: "We have decided to ask the state-run Nepal Oil Corporation to revoke the price hike."

 

The government's about-turn came just one day after it imposed the fuel-hike in an attempt to reduce the financial losses caused by subsidising fuel.

 

The government's hand was forced after dramatic protests in the capital and elsewhere in the country.

 

In Kathmandu, the Nepali capital, demonstrators torched government cars and motorcycles.

 

In the countryside, protestors blocked the Prithvi highway, the main route to Kathmandu, cutting off transportation to the city.

 

No arrests or injuries were reported.

 

Gyawali said U-turn was made at a cabinet meeting late on Sunday and said that the change would take place immediately.

 

The state-owned Nepal Oil Corporation owes 16 billion rupees ($213 million) to the Indian Oil Corporation, from which it imports all of Nepal's oil products.

 

Saturday's increase had raised the retail price of petrol 25% to 84.25 rupees ($1.20) a litre.

 

The government's losses from subsidising petrol, diesel and other oil products have been increasing as world oil prices rise.