India won't cut duty on oil imports

NEW DELHI, May 15 (UPI) -- Indian Finance Minister P. Chidambaram said there will be no reduction in the duty charged on imported oil, despite soaring energy prices.

India's state-owned oil marketing companies have been hit hard by a sharp jump in oil prices, and there had been talk that the import duty might be cut to offset some of their losses.

"No. Because mere reduction in import duty on crude oil has no impact on administered prices," Chidambaram told journalists Thursday in New Delhi, the Press Trust of India reports.

He was answering a question on whether the government was considering cutting oil tariffs similarly to what it has done in the case of some other commodities to check consumer price increases and the consequent inflationary pressures.

In the case of crude oil prices, however, India's ruling coalition, led by the Congress Party of Prime Minister Manmohan Singh, has faced stiff opposition from its Left partners for passing on the higher prices to the masses. The government needs the support of the Left to stay in power at least until elections next year.

Thus far, state-owned oil companies, such as the Indian Oil Corp., HPCL and BPCL, have been partly compensated with government-issued bonds totaling about $4.8 billion.

Chidambaram's Finance Ministry plans to issue another $3.6 billion of bonds this fiscal year, the PTI reports.

India's spectacular economic growth of recent years has been hurt by the recent jump in world commodity and food prices. Inflation is currently running far above 7 percent, and the Indian rupee has slipped sharply against the U.S. dollar as more of Indians' foreign exchange reserves get depleted to pay for higher import prices.

Stiff opposition from the Left parties also has stalled India's civilian nuclear deal with the United States. Both countries are keen to complete the deal before the end of the administration of U.S. President George W. Bush, who helped draft the deal along with Indian Prime Minister Manmohan Singh.

The nuclear deal, if ratified by both countries, would allow India to obtain civilian nuclear technology and fuel from the United States, ending India's isolation from other nuclear powers and meeting India's growing energy demand.