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Montek favours hike in petro product prices

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The Deputy Chairman of the Planning Commission, Mr Montek Singh Ahluwalia, and the US Ambassador, Dr David Mulford, at a meeting organised by Amcham India in the Capital on Monday. Ramesh Sharma
The Deputy Chairman of the Planning Commission, Mr Montek Singh Ahluwalia, and the US Ambassador, Dr David Mulford, at a meeting organised by Amcham India in the Capital on Monday. Ramesh Sharma

Our Bureau

New Delhi, Aug 22

FAVOURING a hike in petro product prices, the Deputy Chairman of the Planning Commission, Mr Montek Singh Ahluwalia, today said that in a scenario of sustained increase in global oil prices, it is essential to align domestic oil prices with international prices.

"Domestic oil prices will have to be aligned with international prices. It's fiscally irresponsible not to align domestic oil prices (with global prices). It's a form of hidden subsidy and has negative consequences. Its effect on oil companies in the long run would be adverse," he told newsperson on the sidelines of a meeting organised by the American Chamber of Commerce in India (Amcham India).

However, he added that exceptions could be made for targeted groups and for the rest of the consumers, the effect of the increase in international oil prices must be passed on.

"It is normal practice of good economic management not to have open-ended subsidies on items where international prices are shooting up."

He also said that the Government was fully aware that the current situation is not sustainable. "In India, the situation is little complicated. Oil bears heavy taxation burden. Around the world, the principle that many countries have adopted in adjusting high oil prices is through lowering duties. More or less that's what we have been doing. But we have not done a neat job. I assure you that we are not going to leave this unattended," Dr Ahluwalia told Amcham India members.

Dr Ahluwalia's comment on domestic oil prices has come close on the heels of the Finance Minister, Mr P. Chidambaram's reported remark made on Sunday at Karaikudi, in Tamil Nadu, that there was no alternative but to hike the prices of petroleum products and that the people will have to share a part of the burden.

The Finance Minister had said that oil companies would have to surmount under-recoveries of Rs 30,000-Rs 40,000 crore during this fiscal if the current trend in crude oil prices continues for some more months.

Petrol and diesel prices were last raised in June 2005. State-owned oil companies have demanded another hike in the wake of a recent surge in international crude oil prices that are currently now around $65 a barrel.

(This article was published in the Business Line print edition dated August 23, 2005)
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