Thaindian News

By Naveen Kapoor

On Board Air India One, March 1 (ANI): Prime Minister Dr. Manmohan Singh on Monday hinted that his Government may not initiate a rollback on fuel prices, and said that the economy has the capacity to absorb the hike without setting any inflationary pressure.

“Well any increase in prices does hurt some people, but we have to take a long-term route. We cannot save people from inflation if we follow all along populist fiscal policies,” Dr. Singh said.

“Sooner or later these populist policies if persisted for the long time to come will lead to the erosion of the investment climate and will lead to erode the capacity to create new jobs. It will lead to the erosion of our ability to invest in our flagship programmes for the poor people,” he added.

The Prime Minister reckons that the direct effect on the wholesale price index (WPI) will be no more than O.4 percent.

“There may be some escalations, but my hope is now that the rabi crop is coming into the market, prices which has caused the great degree of concern (wheat, sugar and pulses) will see some moderation,” Dr. Singh said.

The Prime Minister’s comments on the fuel price came a day after Finance Minister Pranab Mukherjee said that he was open to discussing differences on the fuel price hike with the United Progressive Alliance (UPA) allies- the Trinamool Congress and the Dravida Munnettra Kazhagam (DMK)- who have appealed to the Prime Minister and to UPA chairperson Sonia Gandhi to consider a reversal.

In an interview to a leading daily, Mukherjee said that the fuel price hike of Rs. 2.71 on petrol and Rs. 2.55 on diesel, announced in 2010-11 budget could be revisited, but did not say when.

“These (objections to the fuel price hike) are a political prospective. Our capability of reducing the cost of production is not relevant. Whatever the pricing ruling in the international market are, you will have to get it,” Mukhejee said.

India imports 80 percent of its crude oil requirements, the prices of which had shot up to 147 dollars/barrel in June 2008, and have now stabilized at around 80 dollars/barrel.

Rising inflation, particularly food inflation, has sparked street protests and put political pressure on the Congress-led government to find a solution without hurting economic recovery.

Petrol prices rose about six percent and diesel prices by 7.75 percent after the government increased factory-gate taxes and import duties on the fuels as part of last week’s General Budget for 2010-11.

The government has announced a hike in excise duty on petrol by one rupee. (ANI)