How Montek justifies diesel price hike

Strongly backing the decision to hike diesel price and cap on supply of subsidised liquefied petroleum gas, Planning Commission said on Friday the country needs lot of tough decisions and diesel and petrol prices should be deregulated in phases to cut down deficit.

"Diesel price hike is a tough decision and we need lot of tough decisions to get to 8 per cent growth rate," Planning Commission Deputy Chairman Montek Singh told reporters.

"I think they have taken a very important step. I am very glad that the government has taken this decision (to hike diesel price)," he said.

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The government on Thursday hiked diesel price by Rs 5.63 per litre and capped supply of subsidised LPG to 6 cylinders per household in a year.

"This is not complete deregulation. Both petrol and diesel price should be deregulated. It has to be done in steps," he said.

Referring the huge subsidises borne by the government on petroleum products and the resulting budget deficit, he said there should be greater alignment of domestic prices with international rates.

Acknowledging opposition to the government's decision, he said, "Any effort to raise price always creates problem.

"We should not have an impression that not raising diesel prices is a costless option.

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"The real question is could government have afforded not to have raised diesel prices. The answer is no," he said, adding diesel was a general purpose fuel which is an input into all economic activity.

He said the options before the government were either the budget bear the burden, plan will take a cut on growth or starve the petroleum sector, which will be a disaster.

"Energy security is very important. We need to economise energy.

"We need to put resources in exploration, production and development," he said adding that lack of movement in this regard could condemn the country to low growth rate.