Plan to divert diesel exports to domestic market mooted in India

The Indian government is considering dipping into the vast export volumes of one of its biggest domestic oil refiners to ease the cost of diesel in the country.

Press outlets said the government is considering a proposal to use 2 million tons of diesel fuel a year from Reliance's Industries' refinery in Jamnagar in the state of Gujarat. The refinery produces 11 million tons of diesel a year for export, but the government is proposing a plan where the 2 million tons to be kept in the country would be given deemed export status.

The refinery, a 100 percent export facility, gets tax breaks from the government. Keeping the domestic diesel deemed "export" would keep profits the same for Reliance as well as pump much needed fuel volume into the domestic market.

Meanwhile, some Indian politicians are bandying about a proposal to end tax relief for so-called export-oriented units as a way to induce diesel produced in India to stay in the domestic market. The party leading the charge on the proposal, the Samajwadi Party, got a huge boost Tuesday when a vote of trust on the current party in charge, Congress, went the way of a Congress-Samajwadi. The generally neutral Samajwadi backed Congress when two other parties conspired to bring the current government down.