Calling upon the need to revise the prices of diesel and cooking gas (LPG) and reduction of fuel subsidies, industry body — Confederation of Indian Industry (CII) has suggested that the government should move forward swiftly on the route of rationalisation of petroleum prices.
CII has said that the impact of diesel price regulation is evident in multiple sectors of the economy, and in the final analysis, it is obvious that diesel subsidy is doing more harm than good.
"Diesel is widely used in transport, agriculture, and power generation," said Chandrajit Banerjee, director general, CII. "Inefficient pricing distorts modes of usage as also macroeconomic indicators such as fiscal deficit, inflation and balance of trade."
He said that fuel subsidies were introduced in India at a time when disposable incomes were low, and when an overwhelming section of the population could not afford to pay for fuels that were pegged to international prices.
"For a number of decades, such subsidies played a useful role in buffering the meager incomes of millions of middle class and lower middle class Indians," he said, adding that in the India of 2012, fuel subsidies may perhaps do more harm than good and distorts the energy economics of the country.