NEW DELHI (Bloomberg) -- Prime Minister Manmohan Singh’s government, which won the national election in India this month, may ease curbs on fuel pricing and restore a tax break for gas production, the chairman of Oil & Natural Gas Corp. said.

“It will not be surprising if the government allows some amount of freedom on fuel pricing, including gas,” R.S. Sharma, who is also managing director of the country’s biggest energy explorer, said by telephone from New Delhi. “These issues have been languishing with the government as there were pressures from allies.”
Singh’s victory, the biggest in India in two decades, may loosen political shackles that have restrained the country’s economic growth as it seeks to free half a billion people from poverty. Government controls on the prices of automobile and cooking fuels force state-run refiners to sell oil products below cost and the losses are partly borne by exploration companies.
Refiners in China, the world’s second-biggest oil user, are assured of profits because they can adjust gasoline and diesel prices when oil changes by 4 percent over 22 working days. State-run ONGC gives discounts on the crude it sells to the refiners, reducing the benefit it gets from rising oil prices.
“We hope there will be more clarity in fuel pricing,” Sharma said. “It affects profits.”
ONGC shares climbed as much as 162.65 rupees, or 20 percent, to 975.8 rupees in Mumbai trading, the biggest gain since Aug. 4, 1995. The shares gained 13 percent to 920 rupees at 11:55 a.m., when trading on India’s stock exchanges was halted for the day after the benchmark indexes surged by the maximum upper limit.
-------------Bigger issue
“Dealing with fuel prices should be easier now,” said S.K. Joshi, director of finance at Bharat Petroleum Corp., the nation’s second-biggest state refiner. “The bigger issue is deregulating prices completely. That is a big call and we will have to see how that goes.”
Officials from state-owned Indian Oil Corp., the nation’s biggest refiner, including Chairman Sarthak Behuria and director of finance, Serangulam V. Narasimhan, couldn’t immediately be reached by telephone.
ONGC sells natural gas to power and fertilizer companies below cost as India attempts to keep electricity and food prices in check and meet demand in the world’s second-fastest growing major economy.
The government has yet to implement an increase in the price of gas that was approved in May 2005, according to Sharma.
“This is May 2009 and we are still selling at the same price,” he said. “Now the government will be able to take decisions and implement them.” He didn’t say how much ONGC loses every year on gas sales.
-----------Government formation
R.S. Pandey, the senior-most bureaucrat in the oil ministry, declined to comment before the new government takes office. Murli Deora, who served as oil minister in Singh’s previous cabinet, said it would be unfair to comment on policy decisions before the next cabinet is installed.
Singh’s ruling Congress party starts forming a new government, without needing the support of communist lawmakers who oppose fuel price increases and tried to bring down the government last July over a civil nuclear energy accord with the U.S.
ONGC’s Sharma said he expects explorers to be given a seven-year tax break on income from gas produced at new fields to help boost investment. A similar proposal made during Singh’s first term was shot down by some coalition allies.
The government in April postponed India’s largest auction of oil and gas fields on concern that the lack of such a tax break would discourage domestic and overseas companies from bidding, Oil Secretary Pandey said April 9.
Asia’s third-largest energy consumer had put up 70 areas for auction.