Click to play videoThe Prime Minister-appointed Kirit Parikh Committee has suggested freeing petrol and diesel prices and called for raising LPG rates by a steep Rs 100 per cylinder and kerosene by Rs 6 a litre.
The recommendations may not be acceptable to the government battling high inflation.
CNN-IBN spoke to Secretary of the Ministry of Petroleum and Natural Gas S Sundareshan about the recommendations and the likely price hike.
CNN-IBN: Will there be a fuel price hike? Is there a case for fuel price hike?
S Sundareshan: The Kirit Parikh Committee of which I was also a member has submitted the report to the government yesterday (Wednesday). The recommendations are already known - freeing of prices of petrol and diesel, hike in the price of Kerosene and LPG. The Government will examine this report. The Minister of Petroleum and Natural Gas has given an assurance that this matter will be processed in the Ministry in a week's time. The procedure is that there after this will be considered by the Cabinet. So we will put it up before the Cabinet in a week's time and it will be considered by the Government at the highest level in about 15 days.
CNN-IBN: Is there a sound economic reason why there should be a hike in fuel prices?
S Sundareshan: Petroleum products in the country are produced out of crude that is imported from outside and the prices in the domestic market have to have some relationship with the international crude prices. So when you free the price of petrol and diesel doesn't mean that the prices all the time are going to go up. When the international crude prices go down, the prices of diesel and petrol will also go down. So what is suggested is not an increase in the price but a linkage in prices of petrol and diesel with international crude prices. In the case of LPG and kerosene there is a case of subsidising a part of the price since they are the fuel of the common man. The committee has gone into this at length and what it has suggested is not a complete pass through. It is only a marginal hike and the government would have to take a view as to what extent they would subsidise.
CNN-IBN: The government is fighting price rise. There is a worry about a huge increase in petrol, diesel LPG and kerosene prices. So some kind of assurance for the common man?
S Sundareshan: Well, that's not really very sound economics. First of all in the case of petrol, LPG and kerosene it is an end user fuel. It should not have any further effect as most of the petrol is used by car owners, two-wheeler owners. There is going to be no cascading effect. As also in the case of LPG and kerosene which is used as cooking medium and for lighting purposes. In the case of diesel we argued this at length in the report and inflation would be there whether the prices are increased or subsidised through fiscal means or through borrowing. So if there is a rise in international crude prices it is very naive not to expect any effect within the country. So just by controlling the price of diesel I don't think you are controlling inflation.
CNN-IBN: What you are saying is that we cannot avoid a hike?
S Sundareshan: If the price - the fundamental theme of the report is sustainability. This report is not meant for the next three weeks or next three months. It is a long term solution to the problem of fluctuations in international oil prices. It is the report which will tackle the situations whether prices will increase or prices will go down. What it recommends is - sustainable subsidies on account of LPG and kerosene over a period of time which is predictable. There would be an upstream contribution by the government. It's based on the twin principles of sustainability and equability.
CNN-IBN: It's not imminent but we can't avoid it for a long time. Is that what we can say?
S Sundareshan: Those are your words. I'm not responsible for what you are going to say about that. I have explained you the factual positions.
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