Prime Minister Manmohan Singh on Friday told the nation in a televised address that the subsidy on petroleum products was becoming unsustainable.

Explaining the compulsions for increasing the price of diesel and putting the cap on LPG cylinders, he said the subsidy on petroleum products — Rs. 1,40,000 crore last year — was growing: had the government had not acted, it would have become unsustainable, leading to “a further steep rise in prices and a loss of confidence in our economy” among domestic as well as foreign investors, and a spike in unemployment.

Taking a swipe at the wealthy, the Prime Minister pointed out that much of the diesel is used by big cars and SUVs “owned by the rich and by factories and businesses.” Should government run large fiscal deficits to subsidise them, he asked. On the other hand, taxes on petrol were reduced, he said, for “the crores of middle class people who drive scooters and motorcycles.” The decision on LPG was based on a study that “almost half of our people, who need our help the most, actually use only 6 cylinders or less.” Even after the price increase, he pointed out that the prices of diesel and LPG in India, were lower than those in Bangladesh, Nepal, Sri Lanka and Pakistan.

FDI in retail, the Prime Minister explained, would ensure better prices for farmers, and lower prices for consumers. The fear that FDI would hit small traders, he stressed, was unwarranted as “In a growing economy, there is enough space for the big and small to grow.”

Finally, State governments had been allowed to decide whether FDI in retail could come into their States. “But one State should not stop another State from seeking a better life for its farmers, for its youth and for its consumers,” he said.

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