Fuel pricing reforms will go ahead full throttle notwithstanding opposition from the BJP-led NDA and the UPA partners. After petrol, retail prices of kerosene will be deregulated to trim the deficit and restore fiscal balance. Cooking gas and kerosene will continue to be subsidised.
“Petrol prices have been set free, the same is going to be done to diesel prices,” Prime Minister Manmohan Singh asserted. Briefing reporters aboard Air India One on the way to Frankfurt after participating in the G-20 summit in Toronto, Dr Manmohan Singh said, “We have taken due care to ensure that the poorer sections are affected the least possible and (will) keep under regulation the prices of kerosene and LPG.”
Last Friday, the UPA government deregulated and increased petrol prices by Rs 3.50 per litre. Simultaneously, diesel and kerosene was made dearer by Rs 2 and Rs 3 per litre respectively and the cooking gas subsidy was reduced by Rs 35 per cylinder.
The fuel pricing reforms announced by the Prime Minister are in sync with the recommendations of a ministerial group headed by finance minister Pranab Mukherjee and price decontrol in auto fuels is in consonance with the recommendations of the Kirit Parekh Committee.
The NDA, and UPA allies like the Trinamul Congress and DMK, have opposed the increase. “I have read about the intentions of the Opposition in the press. I have not talked to anyone. But I hope that people will appreciate the adjustment made in petroleum prices,” Dr Singh said.
“People are wise enough to understand that excessive populism should not be allowed to derail the progress of our country,” the Prime Minister said, citing budgetary constraints, an unsustainable subsidy burden and ever-expanding under-recoveries of petroleum companies. He also cited the international kudos his government received after initiating pricing reforms on fossil fuels.
Dr Singh said current levels of foreign capital inflows do not warrant imposition of a Tobin-type tax. “We have not reached a stage where capital inflows have become a problem. We don’t face situations which would require an imposition of a Tobin-type tax” on foreign portfolios and FDI inflows. His assertion comes in the wake of RBI governor D. Subbarao’s statement that a
“Tobin-type tax” was not off the table completely. The Tobin tax was first imposed in the US on all foreign currency transactions by President Richard Nixon on the recommendation of Nobel laureate James Tobin.
FDI inflows during 2009-10 have been pegged at $33.1 billion in 2009-10 as against $31.3 billion the previous year. Portfolio inflows into Indian markets were valued at $29 billion in 2009-10 vis-à-vis $15 billion the earlier year.
On the outcome of the G-20 Summit, Dr Singh said, “What we need is a calibrated attempt at fiscal consolidation rather than one-size-fits-all sort of action”. He argued in favour of a phased withdrawal of stimulus spending while allowing countries in the euro zone that built up deficit to follow a differential economic strategy.
But, he conceded, “Our fiscal concern is a cause for concern. But when compared with the fiscal deficit or GDP-to-debt ratio of major developed countries, I think we come out much better.”
On the future of the powerful G-8, the PM said, “G-8 will probably deal with security issues more vigorously than it has been doing in the past.” He confirmed that a decision will be taken by Bric leaders at a meeting ahead of the G-20 Summit in South Korea’s November session on co-opting South Africa, Mexico and Indonesia into the group.
The PM said national security adviser Shivshankar Menon will travel to the US next month to finalise the agenda for President Barack Obama’s visit to New Delhi in November this year. “President Obama has an ambitious agenda. We will look forward to his successful visit,” Dr Singh said.
On Pakistan, the PM stated, “I think there is some hope. As I have said, on dealing with Pakistan our attitude should be to trust, trust, but verify. Only time will tell which way the animal will turn.”
PM speaks:
• Calibrated withdrawal of stimulus packages in offing
• Sikhs of Indian origin in Canada contributed handsomely
• Diesel prices to be freed, prices to be reviewed every fortnight
• There is hope for peace with Pakistan
• No Tobin tax, capital flows not a problem
• No legislation on corporate social responsibility, it would be voluntary
• G-8 may focus on security issues, Bric membership likely to expand
• G-20 becomes premier forum for international economic decisions
• NSA to visit US next month to finalise Obama visit agenda
• India to approach US shortly for Warren Anderson extradition