Inflation puts deregulation of diesel in dilemma

New Delhi, Mar 1: The government on Tuesday, Mar 1 confirmed that a decision to free diesel prices from it's control will depend on the inflation situation.

"We had announced last year that the decision would be taken at an appropriate time to deregulate diesel. The government hasn't changed their decision... We have to see how the inflationary pressures go and take a decision," Revenue Secretary Sunil Mitra told reporters on the sidelines of an Assocham function.

On rising global crude prices, Mitra said that the government would react as the situation unfolds. "It would have been inappropriate for us to take a stand (in the Budget) on how much petroleum is going to cost," he added.

Crude oil prices in the international market are ruling above USD 100 a barrel and with the crisis worsening in Libya and other Middle East countries, they may go up further.

Although food inflation declined from 20.2 per cent in Feb, 2010, to 9.3 per cent in Jan, 2011. It still remains a concern for the government.

Headline inflation in Jan, at 8.23 per cent, is above the comfort level of around 5-6 per cent. Mitra said that it is impossible to assess the ramifications of the current crisis in the Middle East.

"... It is impossible to say now where it is going to go, whether it will affect Saudi Arabia or Iraq and other sources from where we get get oil. So this is something that we will have to react to as the situation unfolds," he added.

Mitra said, "if global crude prices increase, petrol prices will also increase, as it is deregulated."

Answering queries on GST, Mitra said that as the Budget is over now, he would talk to the Empowered Committee of State Finance Ministers to take the issue forward.

"We have been more tied up with the Budget, we will now sit down and work on that... We will have to discuss this, have a talk with empowered committee and take a decision," he added.

PTI