The Hindu Business Line : IEA urges India to scrap subsidies to ease fuel demand

Speaking to media persons here, the Executive Director, IEA, Mr Nobuo Tanaka, said, “When we see the situation in the US, high prices have certainly slowed down demand and it could happen to other countries like India.”

IEA has also suggested removing price controls on petrol, diesel, LPG and kerosene in India.

“What is necessary is to have a policy to phase out price control and subsidies,” he said.

During his meeting with the Petroleum Minister, Mr Murli Deora, on Wednesday, he had pressed for removal of subsidies.

The domestic retail selling price of fuel is capped in India. The public sector oil companies are not allowed to raise the prices in line with international oil prices.

He also advocated India becoming a member of the IEA, so that the agency can make a realistic projection of global oil demand and harmonise energy policy.

India and China, two of the largest oil consumers in the world, are not members of IEA. The two nations joining IEA would harmonise energy policies, stockpile policies and energy efficiency, he said.

On the spurt in global crude prices, he indicated that prices are going to be high. “The world has to live with it,” he said adding that the situation in the oil market is likely to ease by 2009-10, as spare production capacities come on stream.

“However, beyond 2013, the spare capacities are likely to diminish and we will see that supply is not being able to catch up with demand,” he cautioned.

For the current volatility in oil prices, he said, speculation on weather, currency exchange rate and geopolitical situation were the reasons.

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