No oil tax coming, says miffed Finance Ministry

PUMPING UP PRICES: Petroleum Minister considering range of options to help state oil firms.

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New Delhi: The Union Finance Ministry said in a statement on Wednesday that some media reports about new tax proposals to help ease mounting losses at state oil firms due to soaring crude prices were "totally baseless".

"The reports are largely speculative and in particular, reports about certain new tax proposals are totally baseless," the Finance Ministry said in a statement. "Ministry of Finance points out that nobody from the ministry had briefed the media," it said.

The country’s policymakers are debating whether to raise petrol and diesel prices to help stem losses at oil firms, which have to sell fuels at discounted rates, worried that such a hike could add to inflation or alienate voters ahead of elections.

Oil Minister Murli Deora said on Tuesday that one other idea under consideration was to impose a levy on income tax in order to create a special fund which would be used to bail out oil retailers, losing tens of millions of dollars a day.

But the additional secretary in the oil ministry, S. Sundareshan, added that the levy idea may not find any takers within the government and he did think it would happen.

The empowered group of ministers, headed by External Affairs Minister Pranab Mukherjee, met on Wednesday to discuss oil prices. Oil Marketing Companies say they'll go into heavy debt if corrective measures are not taken.

Petroleum minister Murli Deora has discussed the issue with Prime Minister Manmohan Singh. The Government is expected to firm up its decision before taking it to the Congress leadership and Cabinet Committee on Political Affairs for a broader consensus

Deora has suggested that the Government cut customs and excise duty through bonds on fuel. The Finance Ministry though is against this.

The other option is a steep hike in fuel prices, and the Government has still to react to this.

Indonesia and Sri Lanka raised fuel prices at the weekend, deciding they can no longer afford to shield their consumers from soaring world oil prices now around $130 a barrel.

Prices in India were last raised in February.