PM advocates further deregulation of fuel prices

Cannes, Nov 4: Unfazed by ally Trinamool Congress' threat of even withdrawing support, Prime Minister Manmohan Singh on Friday virtually justified the hike in petrol prices, saying there should be further movement towards deregulation of fuel prices.

Addressing a press conference after the G20 Summit here, he said the market should be allowed to follow its level.

"Well that is the general direction in which we should move. I think the move to decontrol the prices is a part of that process.

"But as I said, these are very sensitive areas and I have no hesitation in saying ultimately we must allow the markets to find their own level except for those commodities which are semi public goods," Singh said.

He was replying to a question about the all-round opposition back home to yesterday's decision of oil companies to hike the petrol price by Rs1.80 per litre and TC led by Mamata Banerjee even talking in terms of withdrawing support to the UPA government.

"So, the direction of change is clear. We must move in the direction of decontrolling more prices," the Prime Minister said.

The Prime Minister's comments assume significance in the context of stiff opposition to the hike in petrol prices under the deregulated system.

The prices of diesel, LPG and kerosene are still administered by the government and are not deregulated yet.

Replying to a question on inflation, Singh said food inflation is a problem. While the food grains prices are relatively stable, the problem was with the secondary and tertiary food items like vegetables, egg and fish.

This, he said, was a reflection of demand exceeding supply and was also a sign of increasing prosperity.

Singh said while analysing food inflation the increase in the net income by 8 per cent per annum and the population increase by 1.6% should not be lost sight of.

While describing food inflation as a "problem", Singh said it was bound to happen as per capita income in the country was growing at 6.5 to 7%.

To a question, the Prime Minister said money supply does not grow on trees.

He said that the fiscal deficit of 4.6% as projected in the budget has to be taken seriously.

"We have to contain it at that," he said, adding that there may be areas of slippages but government has to get fiscal system in balance.

He said there were three to four methods of doing so, which included cutting down of expenditure and subsidies and resort to disinvestment.

"But having said that what we should do at any particular moment of time is a subject matter of political feasibility. Therefore, timing has to be carefully worked out," he said.

PTI