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Updated: August 3, 2012 18:37 IST

Hike diesel price or face situation like grid collapse: Montek

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Deputy Chairman, Planning Commission, Montek Singh Ahluwalia. File Photo: V. Sudershan
The Hindu
Deputy Chairman, Planning Commission, Montek Singh Ahluwalia. File Photo: V. Sudershan

Raise diesel prices or else face a situation similar to the recent grid failure which led to complete blackout across 20 states for hours, Planning Commission Deputy Chairman Montek Singh Ahluwalia said on Friday.

“The real question is that if we don’t take these hard decisions (diesel price hike), there will be other consequences. You saw that with the grid collapse ... if distribution companies are unable to pay for power, you are going to have some problems,” he told reporters here.

On the diesel price hike, Mr. Ahluwalia said, “when they will raise prices, it will initially have negative impact ... but not raising prices will only mean that oil sector continues to bleed.”

State-owned oil firms sell the fuel at a loss of about Rs 13.65 a litre while they lose Rs 231 on sale of every 14.2-kg LPG cylinder for domestic consumption. Besides, they are losing Rs 29.97 per litre on kerosene.

Without a price hike, a staggering Rs 1,60,000 crore of losses on these fuel sales would have to be met by the government this fiscal.

Mr. Ahluwalia further said, “It is mistake to think that raising diesel prices will cause inflation if leaving them low and having hidden subsidy will not cause inflation.”

If the diesel prices are not aligned with international rates, he said, “either the budget will have to bail out (the oil companies) or we will end with the very sick energy sector. Neither of these is good for inflation.”

According to Mr. Ahluwalia, “...continuing subsidy is not a free lunch. If it was then I am in favour of continuing subsidy.”

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Cut all the pomp and paraphernalia associate with the Rashtrapathi and Raj Bhavans, a colonial vestige. As an everyday occurence, we see a white ambassador (carrying some non-descript minister) with a dozen vehicles in front and in the back. Not to speak of the Police pilot vehicle and half a dozen "security" vehicles tagging along. Multiply this several fold, so many state. govts. and the central, a cruel tamasha at the expense of the national exchequer. Let Shri Montek A. have the courage first to suggest ways and means to reduce this (not talking about elimination) huge drain in the name of "people's representatives". Like charity, let fuel economy begin at home. Wonder if Shri Montek would want to implement "car pooling" for himself and his dept.?!

from:  kvjayan
Posted on: Aug 6, 2012 at 17:55 IST

Highly unscientific statement from a so-called technocrat. He compares apples and oranges just like how he set a ridiculous poverty line -- all this is not done without reason, it is to burden the poor so that the rich will be more comfortable. He definitely has a strong backing of the corporates and sections of the corporate media.

from:  Yashwanth P
Posted on: Aug 6, 2012 at 14:20 IST

Why don't he cut the taxes on petrol and diesel. we are paying 16 rs as tax for diesel and 38 rs tax on petrol .Any way taxes collected by govt are not reaching the people of this country only it is benefiting for corrupt politicians and parties to win elections .please netas of our country don't fool people.

from:  kumar
Posted on: Aug 6, 2012 at 11:29 IST

Had enough of Montek Singh. He always conceives of the plan that are
against Middle class and and can aggravate the already worse problem of
Inflation among the poor class. It's high time he is abdicated of gis
post.He doesn't deserve it!

from:  Ankit Trivedi
Posted on: Aug 5, 2012 at 23:39 IST

What's wrong with this fellow? Why doesnt he compel the Central and State governments to reduce the taxes on petroleum products or allow these taxes for the Oil Companies instead.

from:  mcvsekhar
Posted on: Aug 5, 2012 at 10:57 IST

This is state sponsored capitalism at its worst best. Yes, reduce public monies by
giving large tax write-offs to companies that plunder our natural wealth, and then
cry public deficit to lower subsidies for the income poor.

from:  KS
Posted on: Aug 4, 2012 at 20:44 IST

Let Mr Montek Singh to increase the diesel, LPG, kerosene prices at bar with international stanared but we have to remind him that first he should recomend to the government to increase the salary to the employees , wages to the farmers & wefare to the public to the international stanard, then he could proceed as per his plan!.

from:  B.Pari
Posted on: Aug 4, 2012 at 04:34 IST

I agree with Sh. Ahluwalia, that there is a certain need to lower subsidy burden from government. But who is the real bearer of this burden ? It's the people of India,who are working hard and paying taxes,not the government. If you cut the increase the prices, you need to cut the subsidies in return,and ultimately lower the high taxes imposed on people. He should try to talk with sincerity towards the betterment of people,not just commenting half and vague.
The salaries of petroleum sector employees are among the highest.howis it possible if companies are in high losses? also dont fool Indians with under- recoveries called as losses. Work for the people of India, not for the gains of high earning petroleum sector CEO's.

from:  Vikram
Posted on: Aug 3, 2012 at 23:55 IST

Thanks god Montek Singh does not link resent dismal Indian Olympic
performance with subsidized diesel.

from:  saikat
Posted on: Aug 3, 2012 at 23:50 IST

I suggest to government to increase and keep the diesel, gas and
Kerosene in tandem with international market. At the same time Mr. PM
and his Planning commission has to see that the import taxes and state
taxes on these commodities are reduced drastically, also to be on par
with international level. This would help the end user not feeling the
increase initially. Also Government has to take steps to distance
themselves from a free hand to the refineries to fix the costs of
their products. lastly I would suggest them make private all the

This may look harsh decision, but this is required and will yield
better results.

from:  Mandalika
Posted on: Aug 3, 2012 at 23:33 IST

Tax less, or country as whole can have grid failure.

from:  Manoj Kumar
Posted on: Aug 3, 2012 at 23:20 IST

He is frustrated because cabinet berth was not offered to him!

from:  Tejinder
Posted on: Aug 3, 2012 at 22:53 IST

All policy makers in UPA regime seems to be mindless freak, instead of
taking austerity measure to cut short their futile foreign trips they
are more concerned to lash blows on improvised common man which since
2005 is in a hope to recieve succor from the govt. the planning
commision is such an strategic post which seems to be undermandate in
dearth of visionary

from:  Rishi
Posted on: Aug 3, 2012 at 22:52 IST

He is Insane on one hand he fixes Rs28 as the median daily income for
above BPL and now he wants to raise the price of Basic essentials
instead he has to try to cut down the costs involved in transportation
and storage of petroleum Products this idiotic government does not want
to do that

from:  Ravi
Posted on: Aug 3, 2012 at 22:28 IST

He is taknig rubish, being an educated person he does not know what is
talknig Grid failure and hiking Diesel prices has no relation. This is the
best sardarji joke, instead of reducing the government taxes he is talking
nonsense.Being PC chairman and the formar FM both spoiled country economy
beyond repair because of their worst policies and both were not fit to be
in the office.

from:  C.Mahendran
Posted on: Aug 3, 2012 at 22:18 IST

Unfortunately he happens to be correct. The Indian budget cannot
afford subsidies in perpetuity - it is already running a deficit.
The power blackout is due to many reasons. Some key reasons are:
High demand; Low capacity coupled with unnatural line losses (about
two to three times world standards) due to pilferage. Demand is
unnaturally inflated due to provision of 'free' power to agriculture -
which is misused as is the norm in the country we all love.

The government has not built enough power stations to meet demand.
Nuclear was supposed to be for this - but delays in awarding
contracts, in implementation and just plain moving files are some of
the reasons we do not have enough power. Gujurat along with Himachal
are probably the two sole exceptions to this.

from:  ksmat
Posted on: Aug 3, 2012 at 22:10 IST

Montek and all other ministers including President, PM and others travel in government cost and the increase does not pinch them. Whereas the increase definitely pinches a common man. By increasing Diesel and LPG prices the commodity cost is going to increase and this will effect 80% of middle class families in India. However this will not effect the corrupt ministers. So there should not be an increase.

from:  Ramachandran
Posted on: Aug 3, 2012 at 22:07 IST

Dare to do that and be ready to face the consequences. Let's have a
criteria in this country that no economist should be made the PM. We
need visionary leaders who does not posses high qualified degrees but
vision and wisdom to lead the nation.

from:  Pankaj
Posted on: Aug 3, 2012 at 21:55 IST

Every time planning commission and RBI, comes up with the same proposal:hike diesel prices since government can not provide the subsidy. Don't they realize the fact that more than 50% of the cost of petrol & diesel are actually taxes. Instead of calling it as a subsidy, why can't they reduce taxes? Which law allows them to charge these exorbitant taxes? Can't these institutions do better? They always talk about fiscal deficit? Why? Let them utilize the resources (35 lacs for toilet renovation???) properly. Aren't the government mis-using the public funds? Just imagine an MRO having a sedan with driver and petrol allowance for private usage? Is there any check on these expenses? God knows, when India is going to come out of this mess.

from:  prakash
Posted on: Aug 3, 2012 at 21:52 IST

Mr.Singh, You can increase the price of diesel but, why is it higher than the countries who follow free market. Before increasing the oil and gas prices, you, first as economist regularize the tax system (who have double, triple tax on oil and gas). After that you can increase the price. You should learn proper tax system before making comments.

from:  Ramanath
Posted on: Aug 3, 2012 at 21:40 IST

Sooner or later all subsidies will have to go, if the deficit is to be managed. Why not start
with diesel? Its a weak stagflationary economy. Why not bite the bullet now?

from:  Subhash
Posted on: Aug 3, 2012 at 21:34 IST

The secret of hanging on to power in this country is one must be particularly dumb. A two- some is there in the corridors of power for as long as one can remember. One do not talk at all, the other talks too much.

Small mercy renovating favorite babu's toilets @ Rs. 35 lakh each was not found to be the solution for national power grid outage.

from:  MANISH
Posted on: Aug 3, 2012 at 21:27 IST

It is a bit amusing to read the comments from the readers. They either ignore the core message such as oil companies bleeding to death without hike in diesel price to reflect the cost of oil purchase by the energy companies or don't follow through the reality to its logical end. Major reason for recent power grid failure is demand for power far surpassing the production. Major reasons for low power production is sickly state electricity companies who are running at a loss due to low power tariff and rampant power theft and as a result are unable or unwilling to invest in new plants or pay to purchase power from the power production companies. Same goes from creaking power transmission infrastructure that causes power loss and power transmission process accident prone - investment is lacking in upgrading power transmission infrastructure. As long as majority people are hooked on populist rhetoric and the illusion of free lunch India will continue to languish far below its potential.

from:  Jitendra Dutta
Posted on: Aug 3, 2012 at 21:27 IST

Important posts like PM, Planning Commission chair, finance
ministry,defence ministry must be manned by people having wider
political mandate and popular persona, i.e accountable to people by
phenomenon of VOTE... it's very unfortunate that reverse is true.

Implementing GAAR was first step towards curbing black money..but our
dear FM was replaced by a minister whose election to parliament is
sub- judice... leave alone his popular participation.

a true political leader, even corrupt, feels what his people feels..
and knows pain and sorrow of a common man...the technocrats are
ruining my country since 1992.. someone please save my country!!!

from:  manish
Posted on: Aug 3, 2012 at 21:13 IST

This is a ridiculous statement made by a person on such a high profile post. Can he clarify how come a hike in diesel price will ensure no technical failure in power distribution?

from:  Durgesh
Posted on: Aug 3, 2012 at 21:07 IST

To day he ( Montek ) will say hike the diesel prices to morrow he will advise , best to let MNC to deal with diesel and next he will say best is to privatise the Energy sector, and will again argue for privatisation of railways and finally leave the Indian economy in a big mess. He ( Montek ) is all out to make the Indian Middle class live miserable

from:  Krishnan
Posted on: Aug 3, 2012 at 21:07 IST

Why don't government cut taxes on oil, what benefit will common man get even if prices are hiked. I don't see ANY VISIBLE benefit to common man who will be made to suffer. People may argue that more money will be put in development projects, but my argument is a) whatever money is allocated is not 100% utilized in all development projects b) surplus money gives comfort room to politicians to indulge in giving useless concession to create vote banks(free power to agriculture, writing off farmer's loan, tax breaks to industries which otherwise doing well etc) c) higher chances of indulging in corruption, d) relaxed austerity measures etc. So all in all, common man will pay for all the benefit which political parties will enjoy. And to dear Mr Montek Singh, please reduce your salary to Rs.2600 per month and then deduct Rs.600 for LPG cylinder and at least Rs.400 towards other fuel expenses and plan your monthly budget then. We'll see who won't get impacted by marginal inflation then only.

from:  Abhishek Garg
Posted on: Aug 3, 2012 at 21:02 IST

What is he talking? Please remove this man from Panning Commission and put some one who can feel the pulse of the people.

from:  Balasubramanian A
Posted on: Aug 3, 2012 at 21:00 IST

let indian govt terminate the services of montek singh, it is small step but big leap for indians.

from:  sadath
Posted on: Aug 3, 2012 at 20:57 IST

The so-called,"under-recoveries",are LIES and cheating of the nation.Montek Singh Ahuliwalia is insincere and is for the Private players and "THE MNC",as these will gain by price hikes and DECONTROL.Please google for:-
Some strange coincidences regarding under-recoveries

from:  Sadasivan
Posted on: Aug 3, 2012 at 20:51 IST

He is there in the affair for the last so many years. Can he claim
that he could elevate a single person above poverty line!!?? He talks
nonsense, If by giving subsidies to the tune of few thousand crores of
rupees to the corporate sector in form of tax exemption does not take
our economy to collapse then the subsidies given to people in general
can damage everything!!?? Actually editors/reporters of different news
paper are also afraid(because their papers are owned by big corporate
houses) of these officials who have surrendered the interest of the
country for few chips.They remind me of the sycophants of British
Raj.Very sad.

from:  Swapan Nag
Posted on: Aug 3, 2012 at 20:24 IST

both the sardars are enjoying at the cost of
our exchequer.The mounibaba's silence led to loss of huge money from the

from:  VARADH
Posted on: Aug 3, 2012 at 20:12 IST

Or we can spent less on our toilets...

from:  Milan
Posted on: Aug 3, 2012 at 20:08 IST

Best Thing is to cut the salary of Montek Singh & C Rangarajans to one fourth of what they are paid now. This savings itself will help the energy sector

from:  Krishna
Posted on: Aug 3, 2012 at 20:04 IST

Is this technocrat trying to hold the nation to ransom? Hike diesel
prices so that Shell can find profit in market.Privatize power units to
MNCs or face even more blackouts?

from:  sathish
Posted on: Aug 3, 2012 at 19:28 IST

Why government is not thinking about lowering the taxes on fuel?

from:  Anupam
Posted on: Aug 3, 2012 at 18:51 IST

He does not know what he is talking about. A grid failure is not caused by distribution companies not being able to pay for the power. The grid failure is due to not having enough power. It is because the babus sit on files and do not allow power projects to move faster.It is high time that this man is either sent to a lunatic asylum or to the World bank.

from:  Joseph Eipe
Posted on: Aug 3, 2012 at 18:49 IST
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