Fuel price hike to have 1 pc impact on inflation: Rangarajan

BANGALORE: Defending the hike in oil prices as 'inevitable', the Chairman of the Prime Minister's Economic Advisory Council, C Rangarajan, today said it might have a 1 per cent impact on inflation over a period of time.

"Obviously, it will have some impact on inflation. It might have a 1 per cent impact on inflation over a period of time," he said on the sidelines of the 33rd Annual General Meeting of the Bangalore Chamber of Industry and Commerce here.

Inflation during the month of May, 2010, stood at 10.16 per cent.

Describing the fuel price hike as an inevitable decision, he said, "The domestic prices of petroleum cannot be divorced from the way in which crude oil is behaving in the international market. This will only result in oil marketing companies incurring loss," he said.

"Decontrolling the petro price would mean the oil marketing companies will have the freedom in adjusting the prices as per the crude rates," he said.

"If it was not done, we would have to find some way to meet the under-recovery of oil marketing companies. It was a difficult decision...," he said and went on to describe the decision as a 'Hobson's choice'.