Concerned over the impact of rising oil subsidy bill on fiscal situation, Finance Minister P Chidambaram today made a strong case for correcting distortion in prices of petroleum products, especially diesel and kerosene.
"With less than adequate pass-through, subsidies on these products (diesel, kerosene and LPG) have burgeoned. The problem is that these are clearly not sustainable and we must devise ways and means of correcting the price distortions," he said while addressing the valedictory session of PetroTech- 2012.
The Minister said that since India imports about 75 per cent of its crude oil requirement, the current account deficit (CAD) has widened and the rising subsidy bill increased the government's fiscal deficit.
"The single most fiscal risk not only to India but to all developing countries is the burgeoning subsidy bill. While some provision has been made under oil subsidy year after year, we have found that provision is always way off the mark as oil prices are globally determined," Chidambaram said.
He said the India's macro economic outcome in 2008-09 (the year of global financial crisis) and 2011-12 (which witnessed the Eurozone crisis) were significantly impacted by the rise in global prices of crude oil.
"Tighter product market, rising prices and growing demand could slow and indeed have slowed economic growth and has serious implications for the welfare of citizens and consequently a major challenge for the policy makers," Chidambaram added.