Freeing diesel prices could help rein in subsidy burden, says PM's adviser

Prime Minister's Economic Advisory Council (PMEAC) chairman C Rangarajan today said the government would have to urgently take a decision on freeing diesel prices to contain subsidy burden and to keep fiscal deficit at the current year ceiling of 4.6 per cent of GDP.

"I think the need to take corrective action with regard to petroleum prices has become urgent...We need to contain the fiscal deficit at 4.6 per cent of GDP (gross domestic product) during the year for a variety of reasons," Rangarajan said on the sidelines of the 26th Skoch Summit in Mumbai.

He said some action was called for in the petroleum sector to contain the subsidies at the budgeted level. Regarding the likely time frame for deregulation of diesel prices, he said he thought it would be done soon.

State-owned refiners, Indian Oil, Bharat Petroleum and Hindustan Petroleum are incurring heavy losses due to sale of diesel at subsidised rates.

Although the government has deregulated petrol, giving the oil marketing companies (OMCs) the freedom to fix prices, it has refrained from taking any decision regarding diesel prices in view of high inflation.

International prices of crude oil have soared due to unrest in the Middle East and North Africa (MENA) region.