The government on Thursday said it will be left with no choice but to deregulate diesel prices if the crude in the international market touches $150-$160 a barrel.
Pointing out that it is not possible to deregulate diesel prices immediately as inflation is high, Chief Economic Advisor Kaushik Basu said the government will have to take a call if the crude oil prices continue to rise.
“After all...there is no choice (but to deregulate diesel) if global crude is at $150—160 a barrel,” Mr. Basu told reporters on the sidelines of a CII post-Budget event.
He further said, “I am not of the view that diesel price deregulation is inevitable and that is the position taken by petroleum ministry right now. Given the inflationary situation right now, we don’t want to do that.”
However, Mr. Basu said, if international crude oil prices continue to remain high for a longer time the government will have to make a tough choice between hiking diesel and cooking fuel prices and shelling out more on oil subsidies to companies.
“I can’t give you an assurance that it will happen nor can I say it won’t happen....There can come a point where we are forced to confront the question -- do we take it on fiscal or do we pass it on consumers,” Mr. Basu said.
For 2011—12, the finance ministry has estimated Rs 23,640 crore in oil subsidy, lower than Rs 38,386 crore of current fiscal.
Global crude oil prices are at the highest level since 2008, touching $116 per barrel.
The government had in June last year decided to free petrol pricing from its control and the same on diesel was to be done eventually.
India’s oil imports grew by 7.8 per cent to $7.85 billion in January, taking the import bill during April- January, 2010—11, to $79.95 billion.
Meanwhile, commenting on food inflation figures released on Thursday, Mr. Basu said that although there is a dip, the numbers are not very comfortable.
Food inflation for the week ended February 19 shows a percentage point dip to 10.39 per cent over 11.49 per cent in the previous week.
