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Diesel, LPG subsidy will have to go, says Rangarajan-Ananya Dutta


Pointing out that fiscal deficit was a cause of concern, C. Rangarajan, Chairman of the Economic Advisory Council to the Prime Minister, said on Friday that action on reducing fuel and fertilizer subsidies would be taken “as early as possible.”

“I would not like to put a time frame, I can only say that action will be needed and therefore will be taken as early as possible,” he told journalists on the sidelines of an event organised at the Indian Statistical Institute here to mark the birth anniversary of its founder, P.C. Mahalanobis.

In his address on “Indian Economy – Concerns and Prospects,” Dr. Rangarajan said “subsidies were growing” and there was need to control them. Food subsidies could not be dispensed with, but there was scope for reducing subsidies on diesel, LPG and kerosene and fertilizers.

“In the case of fuel subsidies, while we have allowed the oil marketing companies to price petrol according to market condition, we have not done that in relation to diesel or kerosene or LPG. I can understand some sensitivities with respect to kerosene, but I think in the case of both diesel and LPG, we should really move in the direction of increasing the prices while protecting some sections of the community that have lower income.”

Taking action on the issue of subsidies was not popular or pleasant, but it had to be done, he said.

The fiscal deficit stood at 5.76 per cent of the Gross Domestic Product during 2011-12 and the Centre was targeting to bring it down to 5.1 per cent this fiscal.

Political consensus

Pointing out that “economic policy depends on political sanction,” Dr. Rangarajan emphasised “the need to build a political consensus.” He was responding to a question on the pace of implementing reforms.

Asked whether the Centre might offer a stimulus package to industry given the state of the economy, he said an across-the-board package on the lines of the one given in 2008-09 was unlikely.