'Freeing fuel price to help taming inflation'

The Planning Commission said on Friday decontrolling fuel prices would not flare up inflation rather it will soften generalised rise in prices.

"It (decontrolling fuel price) will not flare up the inflation. I just think that it is not sustainable to have prices those are not line with the world prices," Planning Commission deputy chairman Montek Singh Ahulwalia told reporters in New Delhi.

"By keeping the price of petroleum down you are actually bearing a subsidy that causes a generalised rise in price . . . if you get rid of the subsidy there will be rise in petroleum prices but it will soften the generalised rise in prices," Ahluwalia said.

"It (freeing fuel price) is there in the integrated energy policy, we had said that any policy that does not link petroleum and diesel price to evolving trend in world price is absolutely unsustainable. So I agree with the recommendation of the (Kirit Parikh )committee," he said.

On Wednesday, an expert group, headed by former Planning Commission member Kirit Parikh, suggested freeing of fuel prices.

At present, the government does not allow state-run fuel retailers to fix petrol, diesel, kerosene and LPG prices in line with international cost, resulting in huge revenue losses for the companies and subsidy burden on the government.

Image: Montek Singh Ahulwalia