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Pranab rules out rollback of petrol price hike

Finance Minister Pranab Mukherjee on Saturday said inflationary pressures due to high international commodity and oil prices will persist but ruled out rolling back the hike in petrol prices announced by oil marketing companies last Saturday.

business Updated: May 21, 2011 23:03 IST

Finance minister Pranab Mukherjee on Saturday said inflationary pressures due to high international commodity and oil prices will persist but ruled out rolling back the hike in petrol prices announced by oil marketing companies last Saturday.

Admitting that inflationary pressures weighing on the economy may compromise medium-term growth projection of the economy, Mukherjee said the government will have to closely monitor various sectors of the economy before assessing growth outlook for this fiscal.

Mukherjee had projected a growth rate of 9% in the current fiscal in the Budget 2011-12.

Talking to reporters on the sidelines of a function, he said there was no question of rolling back the petrol price hike, as the government was already burdened with the subsidy given to oil companies, with Rs 16 per litre on diesel, Rs 26 per litre on kerosene and Rs 320 for every 14 kg of a LPG cylinder.

"Till today, I am giving subsidies...Therefore, there is no question (of rollback), because huge subsidies have been provided. Last year, it was close to one lakh crore of rupees, this year I do not know what will be the international price of crude."

"Everyday, the price of crude oil is increasing. The prices were adjusted last time in June 2006. At that point of time, the average price of Indian crude was $89 and now it is at $107," he added.

Last Saturday, oil marketing companies hiked the petrol prices by Rs 5 per litre.

Headline inflation came a tad down to 8.66% in April from 8.98% in the previous month but is still much higher than the comfort level. The weekly food price index dipped to an 18-month low of 7.47% for the week ended May 7 from the previous week's 7.70%.

Speaking on the sidelines of annual general body meeting of Indian Banks Association earlier during the day, he said the country will continue to face inflationary pressures due to the high global commodity and oil prices.

"When there is uncertainty in the global markets, particularly on those products for which we have to depend through imports, naturally it would affect."

He further said inflationary pressures have no predictability or a certain direction.

Like in 2008, when oil and commodity prices shot up and then declined drastically, commodity prices remain unpredictable today. It is too unpredictable, nobody can comment on how these will behave, he added.

He also said that his government, along with the Reserve Bank, is tyring to achieve higher growth and bring down inflation to acceptable level.

To rein in price rise, the Reserve Bank has increased key policy rates nine times since March 2010. In its annual credit policy on May 3, the central bank increased short-term lending and borrowing rates by an aggressive 50 basis points each.

"By constantly adjusting the policy, both from the supply side and the demand side and by taking appropriate fiscal policies in tandem with the RBI, we are trying to achieve high growth and acceptable levels of inflation," Mukherjee said.

Speaking on growth projection for this fiscal on the sidelines of a Union Bank function, he said the government will have to closely monitor various sectors of the economy before it is in a position to assess the outlook for this fiscal.

"When the first quarter figures will be available to us--it is just one-and-a-half months that have passed--then it will be possible for us (to assess the target)," he said.

"Various viewpoints are being expressed about growth. That is why we have to very closely monitor the growth of various sectors," Mukherjee told reporters on the sidelines of a Union Bank of India function.

Rising commodity and crude prices have forced many analysts and economists to revise the global economic outlook, including that of India, which imports nearly 80% of its oil needs.

The global crude prices have breached $125 a barrel though since the past fortnight it has been ruling around $110 a barrel.

The finance minister earlier projected economic growth at 8% for the current fiscal, lower than the budgetary estimate of 9%, due to measures taken to rein in high inflation.

The RBI in its monetary policy on May 3 has pegged the economic growth for 2011-12 at 8% as against 8.6% growth in the previous year.

International agencies, including the International Monetary Fund (IMF), have revised downward their growth forecasts for the country. The IMF early this month had projected 8% growth for 2011.