Fuel price hike must to contain fiscal deficit, says Montek

A day after Prime Minister Manmohan Singh called for phased increase in energy prices, Planning Commission Deputy Chairman Montek Singh Ahluwalia said failure to do so would push up fiscal deficit which is too high.

"Any government particularly in democracy would want to avoid increasing the price. What the public doesn’t seem to realise is that if you don’t increase the price...there would be consequences," he said in an interview to a private TV channel CNBC-TV18.

The consequences of not raising the prices of petroleum goods, Ahluwalia said, would be rise in subsidy bill, more burden on the budget, lesser resources for social sector schemes and deterioration in health of oil companies.

Yesterday, while addressing the National Development Council meeting, the Prime Minister had made a strong case for phased increase in price of petroleum products, coal and power.

Ahluwalia said, "The total under recovery (on petroleum products) is about Rs 160 thousand crore even after the recent diesel price hike. Some of it will go as a burden on the budget."

Admitting that petrol price is even taxed beyond what pure international pricing would suggest he pointed out that diesel is underpriced and LPG is hugely underpriced.

Justifying the capping of cooking gas cylinders, he said, "We are not getting enough appreciation that these things are necessary."

Pitching for aligning the energy prices in India with global rates he said, "We will need to reduce that burden (of subsidies on energy) if you want all the health expenditure etc."

"You can’t load all this (under-recoveries) on the petroleum companies unless you want the oil sector to collapse. We should never have allowed petroleum subsidies to reach the level they have. They are at an unsustainable level," he added.