New Delhi: India has formed a panel to advise the government on pricing fuels and ways to compensate state-run refiners including Indian Oil Corp. Ltd, for selling products below market levels.

The panel, headed by Kirit S. Parikh, a former member of the nation’s Planning Commission, may also make recommendations on the levy of state and central taxes on fuels, the oil ministry said in a statement in New Delhi on Thursday.

The formation of the panel, proposed in the Budget presented by finance minister Pranab Mukherjee in July, is the third attempt by the government since 2002 to align fuel prices with crude costs, a step that will help India’s state refiners.

India asks the refiners to sell petrol and diesel below costs to curb inflation in the world’s second fastest growing major economy.

The panel will examine the current taxation structure of fuels, especially petrol and diesel, and suggest how state refiners can be reimbursed if the government doesn’t allow them to charge market prices, according to the statement.

India dismantled the so-called administered-pricing mechanism in April 2002, allowing oil refiners to set fuel prices for a few months.

Panels headed by C. Rangarajan, chairman of the Prime Minister’s economic advisory council and former governor of the Reserve Bank of India, advised the government in 2006 to link fuel prices to crude, followed by Planning Commission member B.K. Chaturvedi in 2008.

Indian Oil gained 1% to Rs615.20 in Mumbai trading. Bharat Petroleum Corp. Ltd rose 2.6% to Rs554.55 and Hindustan Petroleum Corp. Ltd rose 0.6% to Rs387.50.

The benchmark Sensex index of the Bombay Stock Exchange declined 0.5%.

The three refiners may lose $10 billion (around Rs48,900 crore) in the year ending March after selling fuels below cost, PTI reported on 1 September.