RBI governor D Subbarao claimed that prices of petroleum products (kerosene, diesel, LPG) is necessary to arrest fiscal slippages. The governor on Tuesday said, "Overall from the perspective of vulnerabilities emerging from the fiscal and current account deficits, it is imperative for macroeconomic stability that administered prices of petroleum products are increased to reflect their true costs of production."
While petrol prices are market-linked, the government fixes the rates of LPG, kerosene and diesel, which results in a large budgetary expenditure on subsidies.
Mr Subbarao in RBI's annual monetary policy statement for 2012-13 said, "the budget estimate of oil subsidy is likely to fall significantly short of the required amount."
Meanwhile, petrol pump owners have threatened to go on one day strike demanding a hike in commission they get on fuels. Reports reveal that Federation of All India Petroleum Traders (FAIPT) will go on an indefinite strike from Apr 29-30, if their demands are not met.