The government on Tuesday appeared to be preparing the ground for raising prices of petroleum product in the wake of international crude prices $57 a barrel.
"The mid-term appraisal has identified the immediate corrective policies required in the petroleum sector. However, if oil prices will remain hard, the only way to handle the situation is to let domestic prices rise to adjust to international prices," said Montek Singh Ahluwalia, deputy chairman, Planning Commission.
When asked whether the prices would be hiked in the near future, Petroleum Minister Mani Shankar Aiyar said his ministry had forwarded a note in this regard to the Cabinet secretary.
"It is up to the Cabinet to take up the matter," he added. Aiyar, however, said the high crude oil prices would have a considerable impact on the country's economy though India had enough foreign exchange reserves to meet the higher import bill.
"The impact (on the economy) will be considerable. Apart from high crude oil prices, there is also severe volatility, which is a matter of concern," Aiyar told reporters on the sidelines of the Chemtech-Pharmabio 2005 awards ceremony here.
"We have forex reserves to be able to meet the energy requirement of the country." India imports nearly 70 per cent of its crude oil requirements.
"I don't think there is any cause for panic, but the price at $58 a barrel is unprecedented. There is also considerable volatility in the market," he said.
Aiyar said he expects global crude oil prices to decline in 2005-06. He, however, added that though the prices will ease when compared with 2004-05, they will still be higher from the level seen in 2003-04.