Govt moves closer to fuel price decision

The government is expected to take a decision on whether to raise fuel prices in the next two to three days, with key political leaders expressing a willingness to tackle mounting losses at state oil firms, the oil minister said.

The cabinet was earlier scheduled to meet later on Thursday to discuss a response, which could involve raising fuel prices, cutting taxes on oil products and issuing more bonds to help state firms selling fuels below cost, but the minister, Murli Deora, told reporters the meeting had been postponed.

"Today’s cabinet meeting has been postponed ... The decision can be taken in two to three days," Deora said.

If India raises prices, it would be the latest Asian nation to decide it can no longer shield consumers from crude’s record run, following the likes of Taiwan, Sri Lanka and Indonesia.Deora said Prime Minister Manmohan Singh and Finance Minister Palaniappan Chidambaram were keen to rescue oil firms, which are selling fuel at low state-administered prices and losing tens of millions of dollars a day as a result.

State-run firms, Indian Oil Corp, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd, have said their borrowings were close to the maximum allowed, threatening their ability to import crude in a few months.India imports 70 percent of the oil it consumes.

India’s central bank raised borrowing limits for these companies late on Thursday, but the director for finance at IOC, S.V. Narasimhan, said this was only a short-term measure and the companies needed to reduce their debt in the long run.

Singh and ruling Congress Party chief Sonia Gandhi met in the evening for talks on the issue.India’s leftist parties, key allies of the federal government, have opposed a price rise, but Deora said some communist leaders had been helpful.

"I spoke to some of them. As far as this problem is concerned, they are very cooperative," he said.Congress and its coalition allies are worried that higher petrol and diesel prices could push inflation beyond current 3-1/2 year highs around an annual 8 percent, and upset poor consumers in a year dotted with elections.

But the scale of the losses at state-run oil refiners and retailers may force its hand.Oil ministry officials have described a rise in prices as "inevitable".Oil prices, trading just below $130 a barrel at 1115 GMT, have doubled since last year, but after earlier reductions Indian state oil firms have to sell fuels at prices lower than two years ago as the government is keen to tame inflation.