Energy subsidies unsustainable, reforms needed: Experts

December 13th, 2011 - 10:04 pm ICT by IANS  

New Delhi, Dec 13 (IANS) Energy sector experts Tuesday warned the government that the current levels of subsidies for petroleum products were unsustainable and called for reforms in the segment to promote investments.

“The political leadership will not be able to sustain this level of subsidy for long. They will be forced to initiate reforms in the energy sector as in the 1990s,” said S.C. Tripathi, a former petroleum secretary, at the 10th Petro India conference.

The government in the current fiscal will have to bear a energy subsidy burden of more than Rs.180,000 crore, which might increase due to a depreciating rupee.

Though the government had in June last year decontrolled petrol prices, it continues to dictate retail rates of diesel, cooking gas (liquefied petroleum gas) sold to households and kerosene sold through the public distribution system (PDS).

The government was currently providing a subsidy of Re.0.82 per litre on kerosene and Rs.22.58 per cylinder of cooking gas in the current fiscal.

It provided Rs.44,371 crore to the oil marketing companies (OMCs) through cash assistance, freight subsidy and natural gas subsidy in 2010-11.

According to the experts, the subsidies on petroleum products cost more than Rs.200,000 crores which is expected to throw the public finances into a big mess.

“Experts said the loss of over two percent of India’s gross domestic product (GDP) to energy subsidies was not only undermining India’s fiscal sustainability but also reducing energy security through investment shortfalls,” the forum said in a statement

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