India may decide on a plan to grant Reliance Industries Ltd. a tax break by year's end to encourage the country's biggest company to sell diesel fuel in the domestic market to meet demand.

``By December a view may be taken,'' Oil Secretary R.S. Pandey said in an interview at his office in New Delhi. Under a proposal backed by the ministry, Mumbai-based Reliance would supply the fuel to state-run refiners, including Indian Oil Corp., which import diesel to meet a shortfall in the country.

Diesel production by state refiners hasn't kept pace with India's demand, which rose 18 percent in the April-June period, resulting in shortages. Reliance enjoys tax benefits for earning foreign currency on exports from its 660,000 barrel-a-day Jamnagar refinery, the world's third-biggest.

``Buying from Reliance will reduce supply constraints,'' said Vinay Nair, an analyst with Khandwala Securities Ltd. in Mumbai, who recommends investors buy the stock. ``This will work well for Reliance as long as it is compensated.'' Reliance spokesman Paresh Chaudhry declined to comment.

A delayed monsoon cut hydropower output and increased demand for diesel-run generators in homes, offices and farms, according to the state-owned Indian Oil, the country's largest refiner. India is Asia's third-largest energy consuming nation.

Buying from Reliance would help state-refiners save on transportation costs and taxes incurred on diesel imports.

``It has to be a no-loss situation for oil marketing companies and sellers like Reliance,'' Pandey, the top bureaucrat in the oil ministry, said yesterday.

Shares Fall

Reliance shares fell 3.1 percent to 1,963.2 rupees in Mumbai today. The stock has declined 12 percent since Aug. 19, when Pandey first spoke about the plan to allow tax breaks on possible domestic diesel sales by the company.

State refiners sell diesel, gasoline, cooking gas and kerosene below cost to help the government tackle inflation, which surged to a 16-year high in August. The rupee's 17 percent decline against the dollar this year made fuel imports costlier.

Indian Oil and its state-run counterparts may lose about 1.75 trillion rupees ($38 billion) in revenue in the year ending March 31 if crude oil prices remain at current levels, Pandey said. He estimated the loss at 1.62 trillion rupees earlier this month.

Crude oil in New York has gained 32 percent in a year and the contract for November delivery was at $106.03 a barrel at 12:49 p.m. London time.