Fuel hike will have marginal impact on inflation: Deora

June 4th, 2008 - 6:14 pm ICT by IANS  

A file-photo of Manmohan Singh

New Delhi, June 4 (IANS) The hike in the prices of transport and cooking fuels will have only marginal impact on inflation, Petroleum and Natural Gas Minister Murli Deora said here Wednesday. “The revision in petroleum products’ prices will have but only marginal impact on the annual inflation rate. We were helpless. There were no other options,” Deora told reporters here.

The Cabinet Committee on Political Affairs Wednesday allowed state-run oil firms to hike prices of petrol by Rs.5 per litre, of diesel by Rs.3 and of cooking gas by Rs.50 per cylinder.

The decision came against the backdrop of India’s annual rate of inflation based on wholesale prices shooting up to a three-and-a-half year high of 8.1 percent for the week ended May 17.

In reply to a query, Petroleum Secretary M.S. Srinivasan said the hike will not push inflation rate by more than 0.5-0.6 percent. “Inflation will not shoot up as being feared in certain quarters,” he said.

But some industry lobbies said the hike would lead to 5-10 percent rise in prices of some end products.

“The consumers will feel the heat soon. The government opted for the extreme step to contain losses of state-run oil companies,” Praveen Khandelwal, general secretary of the Confederation of All India Traders (CAT), told IANS.

“There was no need to increase diesel price by Rs.3 per litre after doing away with customs duty on the import of crude oil and lowering it to 2.5 percent from 7.5 percent in the case of diesel,” he said.

Said Associated Chambers of Commerce and Industry (Assocham) president Sajjan Jindal: “Though the decision to hike price of diesel, petrol and cooking gas will have some inflationary impact on Indian economy, the price rise had become absolutely unavoidable in view of skyrocketing crude oil prices globally.

“The hike will have adverse impact on inflation, but the time has come when each one of us should bear the brunt of increased prices of petroleum products,” he added.

The hike had become imminent after the state-owned oil companies expressed helplessness in maintaining the supply chain at the existing rate in view of crude oil costing more than $125 per barrel in global markets.

Be it a cab driver, a shopkeeper, homemaker, student or a government official, all told IANS that although they expected a hike in fuel prices, the 9.5-11 percent rise was too much for them to handle.

“I now have to juggle my entire monthly budget. The hike is difficult to handle, especially for a middle-class housewife. I have to cut down on the purchases,” said Minu Agarwal, a homemaker in the national capital.

Prime Minister Manmohan Singh had Monday set the process of revision in motion by saying at the annual summit of an industry chamber here that the government had no other option.

“We cannot allow the subsidy bill to rise any further,” he said.

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