Deregulate diesel prices: Chief economic advisor

"I personally believe that diesel prices ought to be freed before long. But whether it should be done immediately or we should choose a better time to do that is a open question," Basu told reporters on the sidelines of an event at the Bengal Chamber of Commerce here Thursday evening.

"As soon as you liberalise diesel prices, you will see a short-term rise in prices across board. In the long-run, inflation will go down if you liberalise diesel prices," he said.

"For the long-run good of the country, we should decontrol diesel prices. But given that in the short-run it will create a price rise, we may choose the time when inflation is a bit down," he said, adding: "Diesel prices ought to be decontrolled for the benefit of the people".

Basu said kerosene, cooking gas and fertilizers were going to be moved to the direct subsidy bracket, as was stated in the budget for fiscal 2011-12.

Asked about the mechanism for providing direct subsidy to the people, he said: "We are not going to distort the price of kerosene. The benefit will be handed over to the people who are supposed to get it. It will take the form of a smart card, coupon or cash card."

On government debt, the renowned economist said it was currently 74 percent of the country's GDP.

"Yes, in comparison to Asian countries, it is high, but in comparison with European countries, it is low. The finance ministry has worked out a plan that over three years, we will bring it below 65 percent," he added.