Possible outcomes for fuel price reform India Government Look for Way to Financial Health

India government has grapple with the political hot potato of the deregulation of fuel prices, looking for a way to improve its financial health as it tries to shield its 1.2 billion citizens of the high prices. A panel of Ministers, ratified by the cabinet to the country from the fuel determine policy, the policy of thirteen (0730 GMT). Earlier this month, the panel?s decision was postponed due to political concerns that the move would hit voters already high food prices hurt.

Third largest economy in Asia is looking for new ways to channel subsidies to reduce and set the prices of the engine and fuel cooking since the failure of his attempt to 2002 state enterprises refiners for prices to get every two weeks in step with the global rates fixed.

But this is a political minefield in an country where 410 million people live on less than $ 1.25 per day and any decision of the panel of ministers to debate the issue, the approval of Sonia Gandhi, the powerful leftist leader of the Congress Party-led coalition governments have since 2004.

Analysts are concerned that maintaining the status quo would allow private investment in less-developed energy sector to discourage India and send a signal that the government would rather be poor and mostly rural political support than by pushing pro-market reforms please.

B.M. Bansal, chairman of state-run Indian Oil Corp (IOC.BO) on Wednesday said the current gasoline price 47.93 rupees ($ 1.03) per liter, was 3.20 rupees, or nearly 7 percent, lower than the rates, while diesel prices were 9 percent lower.

Shares of the IOC and Bharat Petroleum Corp. Ltd. refinery State (BPCL.BO) and Hindustan Petroleum Corp Ltd (HPCL.BO) was 1.1 percent to 1.2 percent, outperforming the benchmark index, which dropped 0, 5 percent at 0355 GMT on Friday.

* Increase in fuel prices would stoke inflationary pressures, already at a level that is uncomfortable enough for the voters to Congress to slam the municipal elections this week in the swing state of West Bengal.

* A sound economic decision to help India narrow its budget deficit, but could lose the electoral conference of the yield in half a dozen national elections scheduled this year and next year.

* Many allies would be unhappy with the unpopular measure, which is sure to be attacked by opposition parties including the communists, who tried to overthrow the government on a hike in fuel prices in February.

* Rival Asian giant China, his one billion-plus population, comparable to fuel subsidies abolished from January 2009 to large effect on the former wrestling refiners are struggling with losses, such as Indian refineries state do now.

* When India makes its refined fuel reforming in a window that extends from the end of the Budget session in May lawmakers to parliament gathers for its next meeting in August monsoon, here are the possibilities that it might play:

Elimination of controls

* Elimination of subsidies would lead to peaks of 15 percent in retail prices of diesel and gasoline ? to add to the political pressure on a government already facing protests over rising food prices and consumer goods.

* This option appears even more difficult in the wake of two fuel-price increases since the end of February.

* It may fuel inflation, making a tightening of monetary policy. The government budget deficit, now estimated at 5.5 percent of the budget for the year ending March 2011, would probably shrink, freeing up capital for other programs.

* In the fiscal year ended March 31, India spent 149.5 billion rupees (3.35 billion U.S. dollars), or nearly 1.5 percent of all public expenditure, subsidies to oil, compared with initial estimates of 31.1 billion rupees .

* The rates would be private companies, Reliance Industries (RELI.BO) Oil and Essar, which now mainly exports fuel domestic retail provision.

* Revenue would dramatically spike at retailer Indian Oil Corp and Hindustan Petroleum and Bharat Petroleum, and upstream companies ONGC, Oil India and Gail (India).

* Higher rates threaten to dampen consumer demand for fuel and vehicles.

* Demolition government intervention would affect poor consumers, who have no access to electricity and use kerosene for lighting and cooking.

* India can end price controls on gasoline, as fuel for the rich man, and gradually lifting controls on diesel, which is higher inflation, but could easily meet their tax burden.

* It would help to reduce losses at state level oil companies, but fuel demand may soon be affected and could some opposition from the automobile sector to attract.

* It may encourage a change in the fuel. A major difference between diesel and kerosene prices may see the cheaper diesel fuel is used to distort.

* Introduction of a unique identity / Smart cards framework to follow a transparent public distribution of kerosene and LPG domestic concerns.