The Goverment can not cut domestic fuel prices until after state polls end in late December due to rules barring populist pre-election politicing, Oil Minister Murli Deora said, even as tumbling global crude prices made domestic sales profitable once again.
India, like China, has resisted cutting its government-set gasoline and diesel prices in recent months even after U.S. crude oil prices tumbled by nearly $100 or two-thirds from their early July peak above $147 a barrel, a fall that returned local refiners to profitability for the first time in years.
"Crude oil has fallen. We should reduce prices but we cannot do it before Dec. 24 because of the code of conduct," Oil Ministry Murli Deora told reporters on Tuesday, before a series of local elections staggered over the next four weeks.
With domestic fuel prices pegged at the crude oil equivalent of around $61 a barrel, private Reliance Industries and Essar Oil are beginning to reopen petrol stations that were shuttered over the past year as New Delhi failed to raise pump prices to match the surge in imported crude oil costs.
Oil Secretary R.S. Pandey said Reliance was keen to resume retail fuel sales at some of its closed petrol stations, while Essar had revived 500 of its pumps.
He also said his ministry would send a proposal for price cuts and related subsidy issues to the cabinet before Dec. 24.
Asian countries that regulate domestic fuel rates have responded differently to the slump in global crude oil prices as the global economic crisis eats into demand in consumer nations.
Malaysia, which dramatically raised prices in the spring, has cut them back swiftly, while Indonesia -- which sells the cheapest fuel in Asia -- has also trimmed petrol prices.
But China and India have not yet moved, leaving their domestic prices higher than those in the United States and helping revive operations for the likes of Reliance and Essar, whose retail outlets had collapsed as state-run rivals sold fuel at low state-set prices, helped by government subsidies.
India last adjusted government-set fuel prices by raising them by about 10 percent in early June and has continued to sell petrol and diesel at the same price since then.
The 10-percent increase in fuel price in June was moderate, compared to Indonesia which raised rates by 30 percent.
State-run firms Indian Oil Corp , Bharat Petroleum Corp and Hindustan Petroleum Corp , have resisted moves to cut fuel prices, arguing they need to make up for losses incurred earlier as crude rates soared.
The Indian government has refused to raise fuel prices quickly in recent years in order to contain inflation, which was rising quickly earlier this year due to surging prices of food and other commodities.
When it was forced to raise fuel prices in June, annual wholesale price inflation jumped into double digits.
The inflation rate, which soared to nearly 13 percent in August, has now declined to 8.9 percent and a cut in fuel prices should help it fall further ahead of the general elections scheduled for next year.
source
in.biz.yahoo.com
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