The Digboi 1 well, in Assam state, was India's first commercial oil well. Although India boasts one of the world's oldest petroleum industries, a marked decline in that sector in recent years has spurred a call for reforms that could mean billions of dollars of foreign investment in Indian exploration and development.
India has backed off from plans to raise domestic petroleum prices, a move considered crucial to efforts to reform and thus attract foreign capital to its sagging petroleum sector.
The United Front (UF) minority government last week deferred a decision to hike the price of petroleum products, bowing to pressure from a communist partner in the coalition government.
A government spokesmen said the UF steering committee, the government's policy-making body, could not hammer out an agreement that would result in a decision.
He suggested that the committee would take up the issue again at its next meeting, currently scheduled for early in June.
The UF sought to relieve a brutal financial burden on the coalition government that stems from extensive subsidies for petroleum products. Currently, the government owes about $5 billion to be paid to state oil companies for such subsidies.
The domestic price of many petroleum products, including gasoline and auto diesel, was raised by 25% late last year. However, nationwide protests led the government to retract the price hike for diesel.
The Communist Party of India (Marxist) claimed the price hikes would have "disastrous consequences for the economy...(and) impose great burdens on working people."
In his February budget, Finance Minister Palaniappan Chidambaram cut corporate tax rates to 35% from 40% and income tax rates to 30% from 40%.
The communists called for a rollback of such tax cuts it called "concessions to the rich," in order to avoid the petroleum product price hikes.
Copyright 1997 Oil & Gas Journal. All Rights Reserved.
