Sunday, 10 July 2011

‘Fuel price hike will ease inflation in the long run'

Fuel price hike will ease inflation in the long run'

Special Correspondent Duty cut on petro products is a conscious decision: Montek 

Montek Singh Ahluwalia

NEW DELHI: Planning Commission Deputy Chairman Montek Singh Ahluwalia on Wednesday said the hike in prices of petroleum products would help ease inflation in the long run as it would suck money from the system. “As we are raising the prices, it will pull money away from the system. That would have a softening impact (on inflation),” he told journalists here.

Mr. Ahluwalia said he does not agree with the view that if the government had done nothing, inflation would have been lower. “If we had done nothing, then the hidden inflation would have been eating away. Similarly, the decision to cut duty on petroleum products was a conscious decision to moderate the impact (of fuel price hike on people),” he said.

Asked about the impact of the fuel price hike on fiscal deficit, Mr. Ahluwalia said: “They (government) have quantified some revenue losses. What happens to the fiscal deficit depends on many other things. I am sure the Finance Ministry is looking at that. And I think they are shortly going to submit to Parliament some sort of medium assessment on the fiscal position”.

“My personal view is that if we are looking ahead and if India faces a situation of rising energy prices, we should adjust ourselves to passing on the fuel prices, because if we fail to do so, we will be weakening the economy,” he added.

Referring to the proposed National Food Security Bill that aims to provide a legal right to subsidised foodgrains to the poor, Mr. Ahluwalia said the Centre should form a clear idea about the proposed Bill as the new poverty list may not be available soon.

“When it (proposed Bill) will be introduced (in Parliament), I don't know. The Act also depends on the new poverty numbers. So whether you pass it now or you pass it a little later, I don't think the poverty list is going to be available for some time. I don't think the date of the passage (of the Bill) is crucial. What is important is to get a clear idea of what is it going to be,” he added.

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