''When the Cabinet met to decide on hike in fuel prices, we had warned the Cabinet that this could lead to double digit inflation. This is what has happened,'' Mr Chidambaram told reporters outside his North Block office. Mr Chidambaram said he was not in the position to spell out the details of these steps at the moment. Mr Chidambaram said of the 1.77 per cent increase in inflation rate, 1.67 per cent increase was the result of increase in petrol, diesel and LPG prices. "This means that 94 per cent of the increase is directly attributable to the hike in fuel and petroleum products." Mr Chidambaram said.
The Finance Minister said these were difficult times and enjoined upon the people to bear with the government, understanding the difficulties it was facing on account on global crude prices touching the roof.
Mr Chidambaram said he has just met Petroleum Secretary M S Srinivasan, Finance Secretary D Subba Rao and other concerned Secretaries to analyse the situation. Meanwhile, Mr Srinivasan told reporters that there was no question of roll back of prices of petrol.
Mr Chidambaram said the government will take measures on the demand side to bring prices under check. The Finance Minister said the hike in petrol and petroleum products was inevitable and the government had no option but to increase the administrative prices of petrol, diesel and LPG. The government had, on June 4, raised petrol prices by Rs five a litre, diesel by Rs three per litre and cooking gas by Rs 50 a cylinder.
The Finance Minister gave details of the contribution which petrol, diesel, kerosene and LPG had made to the index going up by a whopping 11.05 per cent. Mr Chidambaram justified the difficult times quoting how global crude oil prices have been rising almost exponentially. From the day of the presentation of the Budget, the global oil prices have registered a hike of 37 per cent. From 98 dollars a barrel seven months ago, it has risen to 144 dollars a barrel four days ago and were today hovering between 133-134 dollars a barrel.
The index for the group 'Fuel, Power, Light and Lubricants', which has a weight of 14.23 per cent, rose by 7.8 per cent from the previous week.
This was due to higher prices of light diesel oil (21 per cent), LPG (20 per cent), naphtha (17 per cent), furnace oil (15 per cent), aviation turbine fuel (14 per cent), petrol (11 per cent), high speed diesel oil (10 per cent) and bitumen (7 per cent).
The inflation figure was bad news for the stock market which dipped to a lowest of this year on fears of interest hike.
The industry, which has been reeling under inflationary-like conditions, found Mr Chidambaram's pill difficult to swallow as the Finance Minister indicated that there would also be measures to compress demand.
It was bad news too for the Congress Party which faces Assembly elections in four states in November and General Elections next year.
The Left Parties, which are supporting the government from outside, have in no uncertain terms express their displeasure at the government's inability to bring down the inflation.