The government is considering de-canalising import of petrol and diesel from the next fiscal, a move long awaited by global oil majors like Royal Dutch Shell to begin petro retailing in the country.

The commerce ministry has asked various ministries to justify why the government should continue to be the sole importer (canalising agency) of some products including petrol and diesel in the wake of concerns being raised by some countries that the move is not WTO (World Trade Organisation) compatible, highly placed sources said.

Directorate General of Foreign Trade under the commerce ministry has written to the concerned ministries to ascertain why items should continue to be imported through state-owned trading enterprises, they said.

Currently, import of items like wheat, rice, maize, petrol, diesel, aviation turbine fuel and urea are permitted only through the designated state trading enterprises.

Though the government had permitted private sector firms, which have invested or propose to invest Rs 2000 crore (Rs 20 billion) in oil infrastructure, to set up petrol stations, companies like Shell and Essar Oil have not been able to begin retailing in the absence of freedom to import petrol and diesel.

The two firms, which currently do not have refineries of their own, have retail ambitions with imported fuel.

Sources said the petroleum ministry was favourably inclined to freeing import of petrol and diesel, although with adequate duty protection, and would soon approach the commerce ministry for making the necessary changes in the Exim Policy.

Sources said the commerce ministry was also inclined to consider favourably the issue of decanalising imports of petrol and diesel.

Asked if the petroleum ministry had approached the commerce ministry with such a proposal, an official said, "I am not aware of it, but in case they come to us, we will be willing to consider it favourably."

Petroleum product import is at present allowed only through the government's canalising agency Indian Oil. Though crude oil imports had been de-canalised last year, petro product imports remained under canalised category as imported petrol and diesel could be sold at a cheaper rate under the given duty structure.

A review of canalising comes close on the heels of the European Union seeking consultations with India on import restrictions imposed by New Delhi on certain products under Article 20 and 21 of GATT.

Currently, import of primary products of plant and animal origin are subject to import permits issued by the ministry of agriculture after an import risk analysis based on sanitary and phyto sanitary measures and provisions.

In addition to this, some drugs are being retained in a negative list because of their strategic importance to national health programmes and to check against cheap imports.