India's oil ministry has asked the finance ministry not to expose Indian refining firms to competition from cheap imports and sought duty-free import of liquefied natural gas, officials said on Thursday.

At present, customs duty is 10 per cent on crude and 20 per cent on oil products.

The oil ministry's demand follows a recommendation of a panel of top finance ministry officials that the duty differential between crude oil and products should be halved.

The panel's report will be considered while preparing the budget 2003/04 proposals which will be announced on February 28.

Oil Minister Ram Naik and Finance Minister Jaswant Singh discussed taxation issues for the oil ministry on Thursday.

"The two ministers held pre-budget discussions today. The finance minister will examine the suggestions from the oil industry," a government official, who did not want to be identified, told Reuters.

India exports petrol and diesel but Essar Oil, which is building a refinery, has sought permission to import petrol and diesel and retail the fuels until its own refinery is built.

The oil ministry has also sought duty-free import of LNG, which currently attracts a five-per cent levy.

India has contracted to buy five million tonnes a year of LNG from Qatar. LNG will arrive at Dahej in December but Petronet LNG, which is buying the gas from Qatar, has still not found a single buyer as customers find it too expensive.

Petronet LNG is promoted by state-run oil firms and the oil ministry, which controls these companies, is seeking tax concessions to make the project viable.