Fuel price hike is good news: Montek

The Planning Commission said the decision of oil marketing companies to raise petrol price by Rs 3.14 per litre is a good news and will provide credibility to the economic reforms process.

"What has happened (fuel price hike)... on that front it is a good news. I regard that as a vindication...(and) an increase in credibility of basic part of the reforms strategy," Planning Commission Deputy Chairman Montek Singh Ahluwalia said.

State-owned oil companies, including Indian Oil, Bharat Petroleum and Hindustan Petroleum, on Thursday hiked petrol price citing impact of depreciating value of rupee against dollar on import of crude oil.

After the hike, petrol price increased to Rs 66.84 per litre in Delhi. This is the second hike in four months.

Oil companies had last increased petrol price by Rs 5 per litre on May 15 this year.

On impact of fuel price hike on the automobile sector, Ahluwalia said, "I don't believe that fuel price hike is hurting investment sentiments... We are standing by the signal given by the government that fuel price (in India) will be aligned with global rates."

The decision to hike petrol price is in sync with the views of the Planning Commission, which has been advocating that energy prices in the country should be aligned with global rates.

Asked if terror strikes would affect investment environment, he said, "I don't think so."

Ahluwalia had earlier on Thursday admitted that investment in infrastructure during the 11th Plan period (2007-12) is likely to be 10-12 per cent short of the $500-billion target.

Amid resentment over sharp hike in petrol prices, the government on Friday distanced itself from the decision saying the call was taken by oil marketing firms.

"So far petrol price is concerned, petrol has been deregulated. It is oil marketing companies' review," Finance Minister Pranab Mukherjee said when asked about Rs 3.14 per litre hike.

This is the second major hike in four months.

While the UPA ally Trinamool Congress has already demanded a rollback in the hike, CPI(M) termed it as "callous" and demanded restoration of the administrative regulation of petrol pricing.

The CPI(M) said that the petrol price hike comes at a time when inflation is touching double digits and this would only have a cascading effect on price rise.

The RBI in its monetary policy said that the petrol price hike would push WPI inflation up by 7 basis points, besides having cascading effect.

Petrol prices were freed from the government control in June last year.

A day after Trinamool Congress protested against petrol price hike and alleged that the party was not consulted by the Centre, West Bengal Chief Minister Mamata Banerjee said frequent rise in the prices of the fuel was not desirable.

"We don't want another petrol price hike and we have already conveyed our viewpoint to the Centre," Banerjee said.

She said frequent petrol price hikes push up prices of essential commodities and this has been conveyed to the Centre through the party's All-India general secretary Mukul Roy.

The chief minister said that her party did not just make a protest, but gave relief to common people in the past, whereas the CPI(M) never did anything for them when there were past price hikes.

Banerjee was referring to the reduction of VAT on LPG by Rs 16 per cylinder by her government in the previous instance of petrol and LPG price hike.

Expressing opposition to LPG price hike, she said her government had taken to streets and made surprise checks in big retail markets.