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Wednesday, 27 February, 2002, 16:27 GMT
India oils the wheels of privatisation
Street scene in Calcutta, India
Indian consumers are worried about higher prices for oil products
India is pushing ahead with its privatisation programme with the sale of stakes in two energy firms.

The government has approved the appointment of advisers to oversee the sale of stakes in Hindustan Petroleum and Bharat Petroleum.

India tried to open up its oil market more than four years ago but reforms were halted by opposition from consumers worried that the withdrawal of subsidies on oil products would bring higher prices.

Further details of the plan to sell the country's oil assets, ending two decades of price control, are due to be announced in Thursday's budget.

Softening the blow

Many oil products are subsidised in India.

Cooking gas and kerosene receive the highest subsidies.

Cooking gas is subsidised by up to 40% to benefit India's poor.

India is only able to offer these subsidies as it sells petrol above world prices.

Paras Adenwalla, fund manager at Birla Sun Life Asset Management told the BBC's World Business Report he believed the government would take steps to soften the impact of withdrawing price controls.

"Initially it was planned that all the products would get out of price control from April," he said.

"But due to popular pressure the government will have to reduce the control on cooking gas and kerosene over a period of four years."

Chance for rivals

The planned sale gives overseas rivals a chance to break into the nation's fuel market.

Mr Adenwalla said it will also be good for the Indian economy.

"This is one way of really filling up the coffers for the government and probably this is the best time to do so because the price that they can fetch today is far higher than what they could have done a few years back," he said.

Paras Adenwalla, Birla Sun Life Asset Management
"This is one way of really filling up the coffers of the government"
See also:

06 Feb 02 | Business
India shares surge after sell-offs
05 Feb 02 | Business
Boost to India privatisation
07 Sep 01 | Business
McKinsey tells India to 'try harder'
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