It has to be recognised that not doing anything and continuing with large subsidies also impacts the common man adversely.

This is not the first time that Kirit Parikh has worked on a report on petroleum product pricing. The former Planning Commission member had recommended deregulation of petroleum products and cutting down subsidies in his earlier report.

Parikh acknowledges that no expert panel’s proposals are accepted in full by any Government. However, a small implementation also brings in a change, he said.

Excerpts from the interview:

Since 2010, when you recommended deregulation of petroleum product pricing, what has changed today? How hopeful are you of getting your current proposals fully implemented?

A number of things from the 2010 report have been implemented. For example, petrol price has been deregulated. Diesel prices have been gradually increased.

The Government has announced that it would deregulate diesel price. Kerosene price was increased marginally and allocation to different States has been reduced. So, the Government has accepted some suggestions, so it is a move forward.

Besides, it is not necessary that if you give a report, the Government has to accept everything. That never happens.

Your report suggests steep fuel price hike. What about impact on the common man, who is already reeling under sky rocketing fuel and food prices?

It has to be recognised that not doing anything and continuing with large subsidies also impacts the common man adversely. It is the common man who is bearing it. The Government has to finance it one way or the other. The cost difference doesn’t come from heaven.

We have done a detailed study of the impact of raising the diesel price by 10 percentage points. The poorest consumer in urban or rural India does not have to bear burden of more than Rs 2 or 3 a month per person. The burden is not really huge.

Will the Government bite the bullet as your suggestions will have a direct impact on inflation?

I am not a politician, I am an economist. I can only say what I think should be done. What is being implemented is the judgement on the political process. If you raise diesel price by Rs 5 a litre, the impact on inflation would be two per cent in the next quarter. But six quarters down the line, you will have lower inflation and higher growth. It is really important to recognise that what you do today also has an impact on the future.

In fact, our assessment shows that this increase in diesel price of Rs 5/litre plus gradual increase of Re 1 a litre will bring down subsidy by Rs 40,000 crore annually.

Your take on Finance Ministry’s dissent on your report…

Since 2005, when I gave the Integrated Energy Policy, I have suggested that it should be trade parity price. Export parity price comes close to the trade parity price. There is no difference to it. The difference is only 0.15 per cent that can be wiped out when the international prices go up and down. In this report also I have responded to their dissent.

(This article was published on October 30, 2013)
XThese are links to The Hindu Business Line suggested by Outbrain, which may or may not be relevant to the other content on this page. You can read Outbrain's privacy and cookie policy here.