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Prices reach crisis point

Stepping up the battle against inflation, which has reached 6.73 per cent, the Centre on Thursday reduced prices of petrol and diesel by Rs 2 and Re 1 respectively. It plans to follow this up by easing supply pressures through a more liberal import and fiscal regime.

india Updated: Feb 16, 2007 13:55 IST

Inflation touches 6.73, FM worried; AUTO FUELS CHEAPER
Stepping up the battle against inflation, which has reached 6.73 per cent, the Centre on Thursday reduced prices of petrol and diesel by Rs 2 and Re 1 respectively. It plans to follow this up by easing supply pressures through a more liberal import and fiscal regime.

The retail selling price of petrol in Bhopal would be Rs 47 a litre and diesel Rs 35.74 a litre, with a reduction of Rs 2.17 in petrol and Re 0.98 in diesel.

The high inflation has raised concerns of the economy overheating. The impact on essentials has been great, with prices of pulses and edible oils rising by 20 to 30 per cent over the last year.

Apart from squeezing money supply by raising interest rates, the government last month announced a series of import duty cuts, from Portland cement to metals, aiming to lower the manufacturing costs that push up inflation.

“Prices are rising because supply has not kept up with demand. We are trying to see where these supply gaps are. If the need arises, imports will be made more flexible,” said Commerce and Industry Minister Kamal Nath.

The reduction in petrol and diesel prices, the second in less than three months, was finalised at a meeting between Prime Minister Manmohan Singh, Finance Minister P. Chidambaram and Petroleum Minister Murli Deora.

Deora said the burden of the price reduction would be met partly through revenue and partly through oil bonds. The Finance Ministry will rejig customs and excise duties to absorb the impact of petrol and diesel prices.

The reductions in customs and excise will be in line with the government’s policy to bring down tariffs to Asean levels, Petroleum Secretary M.S. Srinivasan said.
djoshi@hindustantimes.com