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LATEST NEWS UPDATES | Diesel will also be freed of govt control: PM

Diesel will also be freed of govt control: PM

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published Published on Jun 30, 2010   modified Modified on Jun 30, 2010

Indicating a new-found determination to stay the course on politically sensitive reform measures, Prime Minister Manmohan Singh not only defended the recent decontrol of petrol prices but also said diesel rates would also be freed of government control.

In comments while returning from the G20 summit in Toronto, the PM seemed to be in an assertive mood despite the Opposition calling a bandh to protest fuel price hikes. "The fact that petrol prices have been set free, the same is going to be done to diesel prices," agencies quoted the PM to have said.

The PM's view that fuel price decontrol constitutes "much-needed reforms" signals UPA-2's more upfront approach to reforms, a preparedness to bite the bullet apparently based on an assessment that the Opposition may not be able to extract much mileage. The government's defence is based on NDA itself having initiated moves to decontrol fuel prices.

Apart from pointing to the Vajpayee government having decided to do away with administered prices, the Opposition's lack of success in the past in raising "price rise" as a political issue might have helped the ruling coalition in firming up a less apologetic stance. As senior officials have indicated, the oil companies' finances really left government with no options but to remove crutches.

Though the PM was careful in not providing any hint about when diesel prices will be decontrolled, his resolve that the subsidy regime cannot be supportedpoints to a need to control fiscal deficit. The usual argument that kerosene and LPG have been spared is absent as their cost has gone up too, the first time in eight years though they still recieve large subsidies.

"The adjustment that has been made in the prices of kerosene and LPG was also necessary, considering the very high amount of subsidy that is implicit in their pricing structure," Singh said, not shying from stating the economic argument. On whether more reform measures were to follow, he said, "Well I can't tell you what we are going to do next." But he indicated some decisions might in the works by pointing out "I think when things get crystallised in the government system you will know them."

Rejecting Opposition criticism, the PM said the reforms were needed and that governments should avoid "excessive populism". This may also have a bearing on some big ticket programmes that UPA-2 has been planning for a while like implementation of the Right to Education and the proposed National Food Security Act. The finances of these programmes run into thousands of crores and will be in part funded by savings on subsidies and revenue from initiatives like 3G auctions.

It is significant that the government has been keen to ensure the programmes have clearly targetted beneficiaries, particularly in the case of the NFSA. The gains from reining in subsidies would be better actualised if large welfare programmes are not wasteful and not open-ended, senior officials have pointed out. This view has been reflected in the government's approach and has at time set up some tension with the Congress leadership keen on a more "inclusive" view.


The Times of India, 30 June, 2010, http://timesofindia.indiatimes.com/Biz/India-Business/Diesel-will-also-be-freed-of-govt-control-PM/articleshow/6108305.cms


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