New Delhi: Industry body Assocham on Tuesday called for a cut in the consumption of crude oil in order to reduce the country's import bill and rising trade deficit.

"Both the international prices and exchange rate are difficult to regulate so therefore, given the runaway import bill the only policy option left is to curb the demand," it said.

It said reduction in oil consumption "will address a plethora of problems such as rising trade deficit, a bulging fuel subsidy bill and other macro imbalances".

India imports about 83 percent of its oil requirement and this increase has widened the trade deficit to USD 185 billion in 2011-12.

It said that due to opposite movement of international oil prices and the rupee-dollar exchange rate, India is not able to get the benefit of drop in rates of crude oil in the global market.

"The benefits of lower international prices were offset by a faster depreciating rupee and thereby resulting in a higher import bill," Assocham said.

The chamber said the crude oil imports and its impact on government finances is dependent on the import quantity, the international price of crude oil and the exchange rate.

It said, India's crude oil import bill in rupee terms shows a whopping 500 percent increase in the last eight to nine years.

These imports have also been acting as a drag on the foreign exchange reserves, it said, adding in 2002-03, petroleum imports accounted for 23.18 percent of the country's foreign exchange reserves.

The proportion has gone up to 34.80 percent in 2010-11, it said.

"This situation calls for drastic measures and the government has to bite the bullet of either asking states to cut taxes or deregulate the oil sector completely", Assocham said.

(Agencies)

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