Zhang Jinying, a driver for Capital Taxi Co, said the latest price rise would cut her monthly income by more than 400 yuan (US$50).

"Minus the monthly payment of 3,500 yuan (US$4,350) to the company as well as fuel expenses, I could earn around 2,000 yuan (US$248) a month prior to the price increase," Zhang told China Daily. "And now, I will earn less."

The commission said local governments would offset the increased financial burden on taxi drivers in urban areas mainly through readjusting transportation charges and imposing surcharges on fuel oil.

It said local governments should offer provisional subsidies to taxi drivers in urban areas if they are unable to readjust the charges in the immediate future.

An employee of the Shanghai-based Dazhong Taxi Co Ltd said yesterday his company had just received a notice from the local authorities that increased costs resulting from the oil price hikes should not be passed on to taxi drivers, but instead shared by both the local government and transportation companies.

But how exactly the costs will be shared remains a subject of debate.

For operators of rural passenger transport businesses, the government will reduce the impact mainly through adjusting transportation charges and offering subsidies to those in difficulty, the commission said.

Insiders said yesterday's oil price hike was not as high as expected, suggesting that the government has postponed a plan to roll out its new oil pricing mechanism.

But the rise is nevertheless an indication that the government is trying to create a closer link between domestic and international oil prices, they said.

"Now that they have increased the price, that might mean the government is putting off the new scheme,?said Gong Jingshuang, a senior analyst with the research arm of the nation's biggest oil firm, China National Petroleum Corporation.

Analysts said a bolder plan to allow more frequent price changes in bigger margins may have been held back by the tough issue of how to shield lower-income users, mostly the country's 800 million farmers, from rising fuel costs.