Fuel price hike to have only marginal impact on inflation: FM
Finance Minister Pranab Mukherjee said today that fuel price hike will have a marginal inflationary impact and that he will meet the RBI chief before the upcoming monetary policy review to check price-line.business Updated: Jul 06, 2010 22:22 IST
Finance Minister Pranab Mukherjee on Tuesday said fuel price hike will have a marginal inflationary impact and that he will meet the RBI chief before the upcoming monetary policy review to check price-line.
Mukherjee, who had earlier ruled out rollback in the increase in fuel prices ahead of the Opposition-sponsored Bharat Bandh yesterday, said here that he will meet Reserve Bank Governor D Subbarao on July 23 ahead of the monetary policy review scheduled for July 27.
"What was done (fuel price increase) was on the basis of the recommendations of an expert (Kirit Parikh) committee...so far as the inflationary impact of this measure alone (is concerned) it would be a little less than 1 per cent," he told reporters after a meeting of the Northern chief ministers and PSU bank heads.
On his meeting with the RBI Governor, he said, "I cannot comment on the (RBI) policy which is coming. The RBI is entitled to formulate its policy. Of course, the Governor consults the finance minister before he announces (the policy)...On July 23rd, I am meeting him."
One day before the national strike, Mukherjee, earlier speaking to newsmen in Kolkata, had ruled out any rollback of hike in petroleum prices.
The government on June 25 raised prices of petrol, diesel and kerosene by Rs 3.50, Rs 2 and Rs 3 a litre, respectively and jacked up the rate of cooking gas by Rs 35 a cylinder. The decision was taken by the empowered group of ministers headed by Mukherjee.
It also decided to give freedom to the oil marketing companies to fix prices of petrol according to the global crude prices. Prime Minister Manmohan Singh a few days later indicated that diesel prices could also be freed in due course. Under this government was determining the prices of petroleum products.
The hike in prices of petroleum goods, according to experts, is likely to have a cascading effect on inflation, which is ruling high.
Headline inflation touched double digits (10.16 per cent provisionally) in May, but as per the final figures, the rate of price rise has been 11 percent or more since February. But food inflation eased to 12.92 percent in the third week of June from above 16 percent, primarily due to base effect.
Concerned over inflation, the RBI in a surprise move last Friday had raised the short-term lending and borrowing (repo and reverse-repo) rates by 25 bps to 5.5 and 4 percent respectively to check inflation.
Economists say RBI could further tighten the money supply in its monetary policy which is scheduled to be announced on July 27.