Kochi, Nov 9: Prime Minister's Economic Advisory Council Chairman C Rangarajan on Tuesday said India was under the grip of high inflation and deregulation of petroleum prices could further push up prices.
The domestic retail prices would reflect the ups and downs of international crude oil prices, he said.
Talking to reporters on the sidelines of a function at nearby Aluva, he said, “In principle we should move towards deregulation concept. The most appropriate time for deregulating petroleum products would be when the inflation showed the sign of coming down,” he said.
The government should be extremely careful of the timing of the deregulation and should be based on the levels of inflation, he added.
His remarks follow of a steep hike of Rs 1.80 in petrol price effected by oil marketing companies last week. This was the sixth increase since petrol price was deregulated or freed from the government control in June last year.
He also said cutting down on duties to bring down the fuel prices will disturb the Budget proposals and lead to other problems, including higher level of fiscal deficit. The government cannot protect the domestic consumers beyond a level, he said.
His comments assume significance in the backdrop a clamour for a cut in duties to give some relief to the common man after lask week's hike in petrol prices.
He also refuted reports of government trying to regulate the petrol and gas prices. “We have already moved away from that regime much earlier and there is no going back anyway.”
Later speaking at a function here he said rationalisation process in the pricing of petroleum products was still to be completed and this may have an impact on price levels in the coming months. Factoring all these, the headline WPI inflation would remain high till December this year, he said.
He, however, added that there could be a significant easing of inflation in the last quarter of the fiscal and inflation may come down to 7 per cent in March 2012.
The headline inflation was 9.7 per cent in September. Food inflation rose to 12.21 per cent for the week ended October 22.
