High oil prices pose risk for Indian economy

India's foot dragging over ways to limit losses at state-run oil refiners who are selling cheap fuel at a time when global crude is at giddy new highs poses a risk for public finances and the booming broader Economy.

Bleeding more than $50 million a day, firms like Indian Oil Corp are in dire need of rescue but a government facing elections in a key state in December is shying away from the most obvious response -- a hike in state-administered fuel prices.

India is this year yet to raise prices of widely consumed transport and cooking fuels, kept low to protect poor consumers and help fight inflation, while crude oil has jumped to around $95 a barrel.

On Monday, Oil Minister Murli Deora said officials were attempting to minimise any rise in fuel rates when it does respond -- maybe this week -- but analysts said other approaches were not risk free.

"They might reduce the import duty. This would mean a loss of revenue and put pressure on the fiscal deficit," said D.H. Pai Panandikar, an analyst with independent think-tank RPG Foundation.

Courtesy:The Financil Express
Complete artical HERE