NEW DELHI: Making a strong pitch for raising diesel prices, Prime Minister's Economic Advisory Council chairman C Rangarajan on Wednesday said there was a need to revise prices to reduce the huge subsidy burden and bring down the fiscal deficit.
While releasing the economic review for 2011-12, Rangarajan said it was earlier agreed to deregulate diesel prices but the decision was never implemented. He advocated a phased deregulation of diesel prices over the next few years and limiting subsidized LPG cylinders for domestic use. "Consumers should get a fixed number of LPG cylinders in a year and anything above that should be charged at market prices," Rangarajan suggested. When asked if it was a politically viable proposition, he said raising prices would have short-term impact on inflation but would even out in the long term. "The government will have to carry the message to the people," he added.
"It will be necessary during 2012-13 to make some adjustments on diesel prices in a phased manner. We have not done this for quite some time and international crude prices have gone up... It is not possible for us to subsidize this sector beyond a level," Rangarajan said.
Diesel price was last hiked in June 2011. The government had cut excise and customs duties to cushion the impact of the price rise, thus sacrificing annual revenue of Rs 38,000 crore. Pitching for deregulation of urea prices, Rangarajan said, "Partial reforms in the fertilizer subsidy regime of introducing nutrient-based subsidization will not be effective unless the price of urea is decontrolled or at least raised substantially."
The government expects that its subsidy bill would increase by Rs 1 lakh crore to Rs 2.34 lakh crore, mainly on account of higher outlay towards fertilizer, food and oil.
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