By Rakteem Katakey Feb. 4 (Bloomberg) -- Indian state refiners including Indian Oil Corp. gained in Mumbai trading after a government- appointed panel recommended that prices of gasoline and diesel be freed, easing their losses from selling fuels below cost. Indian Oil rose 1.3 percent to 320 rupees at 9:49 a.m. after advancing as much as 5.1 percent. Bharat Petroleum Corp. gained 0.1 percent after climbing as much as 3.4 percent. Hindustan Petroleum Corp. was little changed after rising as much as 3.5 percent. The benchmark Sensitive Index gained 0.3 percent. India must free gasoline and diesel prices from government control and increase kerosene and cooking fuel rates to help develop a viable fuel pricing policy, the panel headed by Kirit Parikh suggested in a report to the oil ministry yesterday. Prime Minister Manmohan Singh may find it easier to implement the recommendations after being re-elected in May without the support of communist parties that oppose raising fuel prices. “The government seems to have intent at the highest level to reform the oil sector,” Krishnakumar Srinivasan, who helps manage about $520 million in equities including shares of state refiners at Sundaram BNP Paribas Asset Management Co., said by telephone from Chennai. “Raising fuel prices has political and inflation issues.” The panel said prices of kerosene should be increased by 67 percent to 15 rupees a liter and liquefied petroleum gas by 100 rupees a bottle, Parikh, a former member of India’s Planning Commission, said yesterday. Prices of gasoline and diesel may rise by about 3 rupees a liter if the government deregulates them immediately, he said. The formation of the panel is the third attempt by the government since 2002 to align fuel prices with crude costs, a step that will help the nation’s state refiners. The combined gross losses of state refiners may decline 56 percent to about 270 billion rupees in the year ending March if the panel report is implemented, S.K. Joshi, director of finance at Bharat Petroleum, said in an interview to Bloomberg-UTV today. Refiners in China are assured of profits because gasoline and diesel prices are adjusted when oil changes by 4 percent over 22 working days. Indian refiners depend on subsidies as part-compensation for selling fuels below cost to curb inflation. To contact the reporter on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net.

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