Deregulate diesel prices as soon as possible: Montek

Observing that the government needed to invest in development of oil supplies, Ahluwalia favoured linking diesel rates with global prices in view of mounting losses of state- owned oil firms.

"I think diesel prices need to be aligned with global prices as soon as possible...(raise in diesel). Prices cannot be delayed from what is happening in global world...delayed by a week or by two weeks (not a solution)," Ahluwalia said."

He was speaking on the sidelines of 93rd annual conference of Indian Economic Situation held at Punjab University.

Asked if hike in diesel rates would raise fuel inflation, Ahluwalia said further subsidising oil prices would result in high fiscal deficit.

"Not raising diesel prices do have a cost... oil companies make big losses... they will not be able to invest in development of oil supplies or else government will have to subsidise and if government subsidises then fiscal deficit will go up," he said.

Global crude oil prices have touched USD 91 per barrel, affecting the recovery of oil marketing companies. Petrol prices are already deregulated.

Ahulwalia comments come at a time when the government is facing flak over high prices of food items. Prices of onion, garlic and tomato had skyrocketed last week though has declined marginally since then.

He said taming inflation has been a biggest challenge this year for the government.
When asked about inflation, Ahluwalia exuded confidence that WPI inflation would moderate to 5.5 per cent or 6 per cent by current fiscal end.

"It is quite feasible that overall inflation will come down to a level of 5.5 and 6.0 per cent by this fiscal-end".

The headline inflation has come to 11-month low of 7.48 per cent in November. But experts expect higher number for December in the wake of high food prices and hike in petrol prices.