Despite retail prices of petrol ruling high, the Centre plans to go ahead with the proposal to deregulate diesel and LPG prices, which will reflect the behaviour of the international crude prices.
“We cannot, for long, protect the domestic consumers from the impact of what is happening internationally,'' said C. Rangarajan, Chairman of the Prime Minister's Economic Advisory Council here on Tuesday.
Talking to media persons on the sidelines of a function held by Federal Bank at Aluva near here, the former RBI Governor, however, pointed out that the government had to be careful about the timing of the decision regarding deregulation given the current rate of inflation.
“We already have a high-level of inflation and decontrolling the petroleum products at this point of time could push the prices further up,'' he said. In his view, the most appropriate time for deregulating diesel and other petroleum products will be when the headline inflation shows signs of coming down.
To a query on the possible return of the administered price mechanism to rein in the ever-rising petrol prices, he cautioned that a roll back of deregulation would lead to huge under recoveries for the oil marketing companies.
According to Dr. Rangarajan, petrol prices were expected to come down on the back of the developments across the globe, especially in the advanced economies. However, it did not happen and the OMCs would find it difficult to sustain in the event of an under recovery.
On the occasion, he also asserted the rights of the companies in fixing the prices of their products. “We have moved away from that regime much earlier and there is no going back in any case,'' he held.
Regarding a cut down of duties imposed on petrol prices, he maintained that the government was not in a position to implement the measure as it had already committed to a large amount of government expenditure. “If we protect the consumer, we will have to face even higher levels of fiscal deficit,'' he said.
Earlier, Dr. Rangarajan inaugurated a customer care contact centre of Federal Bank here and interacted with its employees. The unique feature of the centre — initiated as part of a CSR programme by the bank — is that it is being manned by the differently abled.
Commenting on the occasion, Federal Bank Managing Director and CEO Shyam Srinivasan said the bank aimed to provide equal opportunities to the differently abled persons through the initiative and was eager to attain several other milestones.