Get ready to pay more for fuel

NEW DELHI : Time for a price hike again? C Rangarajan, chairman of the PM’s economic advisory council (EAC), on Friday said insulating consumers from reality like high crude oil prices is detrimental to the economy. The government should allow retail petroleum prices to rise. This follows the PM’s warning signals on Independence Day that there is only this much that the government can do on absorbing the impact of the global crude oil spike.

Global crude oil prices have been above $70 for sometime and although they have softened a little in the past 2 days, it is still at high levels. Mr Rangarajan said keeping retail prices at such artificially-low levels is a disservice to the economy. “In the West, higher fuel prices have led to more efficient usage of energy and energy conservation,” he said. The government’s decision to bail out the oil PSUs with bonds is non-transparent and would impact the economy in the long run, he added.

The EAC report, released earlier this week, had stated that they could absorb another round of retail price hike without having a major impact on inflation. It is estimated that inflation could be kept at 5.5% even after another round of price hikes.

Oil companies are incurring a loss of Rs 100 crore a day on the sale of fuels, and prices of petrol and diesel would need to be hiked by Rs 3-5 a litre to cut down losses.

Mr Rangarajan was addressing the second luncheon meeting of CII Hydrocarbon Club in the capital. The meeting was attended by petroleum secretary M S Srinivasan, Reliance Industries’ president (refinery business) P Raghavendran, Essar group director Suresh Mathur and British Petroleum India vice-president Sanjeev Lowe, among others.

Private sector oil company representatives held that it was difficult to operate in a system where there was no level-playing field. They said it was ‘politics’ that came in the way of enforcing the appropriate model for pricing. They called for a market-driven pricing policy. “The regulator and the petroleum ministry must address the pricing issue,” Shell Group (India) chairman Vikram Singh Mehta said.