New Delhi, June 4 : The price hike announced on petrol, diesel and LPG is on expected lines and was unavoidable said K V Kamath, President, Confederation of Indian Industry in a press release issued here today.
The continued rise in global oil prices had necessitated this action from the government, he added.
The CII in its earlier press release had suggested that the increasing burden of oil prices should be spread out between the consumers through a moderate price hike, and the Government by reducing the indirect taxes on crude oil and petro-products and the oil marketing companies, has achieved this.
The reduction of customs duty and specific excise rate is a welcome measure and shows the government commitment to share the burden of increased global prices, said Kamath.
Prior to this hike, fuel prices were last raised in India in February 2008 - when oil prices hovered around 0 bbl - after a gap of twenty months. Global prices have increased steeply in the past year, and the Indian oil basket now costs around 125 dollars bbl. It has been estimated that a 10 percent sustained rise, if passed through, can add as much as 1.3 percent to inflation. The impact of expanding subsidies could contribute an additional 2.5 percent to fiscal deficit, said the CII release.
The government had a very difficult task at hand, said Kamath.
"A situation of global slowdown, moderating growth in some sectors of the economy, stress on the fiscal deficit and high inflation in the domestic economy presented the government with a tough balancing act. We hope that the growth momentum would not be impacted too hard by the oil situation," he said.
"India cannot afford to compromise its growth process and needs to better target the subsidy outgo in order that the poorest are protected. This is also a time, when we really need to take a very close look at India's energy efficiency and conservation measures," he added.
Oil prices are expected to rule at high levels in the medium and long term. Therefore, policy measures must be put in place for longer time horizons. The necessity of a robust and well-organised public transport system in both urban and rural areas cannot be denied. Energy saving mass transit systems like Metro-rail, mono-rail, high-capacity buses, and smaller public vehicles need to be urgently promoted. A system of incentives for hybrid vehicles, electric cars, traffic management, and energy efficiency can be instituted. At the same time, exploration and production need to be stepped up, and usage of alternative energy sources expanded.
With over 70 percent of India's oil demand being met from imports, it is imperative that the country has an oil conservation target, said CII.
India should target to reduce oil imports by 10 percent by 2010, said CII. CII also suggests that there needs to be a strong partnership between the Government and Industry to achieve this target and a system of recognition should be instituted to reward those companies that have excelled in energy efficiency and conservation.
On its part, CII is engaged proactively in demand side energy management for industry through its Centres of Excellence. CII undertakes initiatives for alternate fuel usage (like wind energy and solar power); energy efficient furnaces and boilers; energy labeling for oil fired systems and gas stoves; extensive awareness campaigns to promote oil conservation in small and medium industries and domestic sector; switchover of captive steam generators from fuel oil to alternate sources; etc, concluded Kamath.