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PM Seeks Wider Consensus On...

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"We cannot allow the subsidy bill to rise any further. Nor do we have the margin to fully insulate the consumer from the impact of world commodity and oil price inflation," the Prime Minister said, addressing the Assocham's annual meeting in New Delhi.

Calling for a wider political consensus, Singh said the government could insulate poor people "up to a point" and economic pricing of oil was essential to sustain growth.

"Even petrol do not fully reflect the world trend... This situation cannot continue forever," he said.

Crude oil prices were trading at $127 per barrel in the global markets today.

Spiralling crude prices have brought domestic oil firms to despair. India’s largest refiner and marketer Indian Oil Corporation (IOC) has warned that its coffers are drying up and it won’t be able to pay crude imports bills beyond September. It has not only put all its current and future projects, worth Rs 45,000 to Rs 50,000 crore, in the freezer, but has also put on hold orders for 4 million LPG gas cylinders. Says Sarthak Behuria, chairman of IOC, “If the government does not take action in terms of tax cuts and international oil crude prices don’t come down, it would be a crisis for us in September.”

IOC reported losses of $100 million for the quarter ended 31 March, as against a profit of $375 million for the same period last year. The other two oil PSUs — Bharat Petroleum Corporation and Hindustan Petroleum Corporation — are in a worse situation because they refine only 22.50 million and 13 million tonnes per annum, respectively, as against IOC’s 60.20 million tonnes. So far, companies have subsidised the losses in marketing through their refining margins. The three PSUs have been losing Rs 300 crore each day as they sell petrol, diesel and LPG at subsidised rates fixed by the government, which are way below the international crude oil price of about $130 a barrel.

According to Deepak Mahurkar, associate director of consulting firm PricewaterhouseCoopers, “It is a distress situation and cannot be discounted. The government has to act.” And fast. Ideally, not wait until September, by when Prime Minister Manmohan Singh hopes inflation will be brought down.

However, the Prime Minister expressed confidence that the Indian economy would continue to grow at 8 per cent and above despite global slowdown.

India has maintained the economic growth of 9 per cent and above for the last three years.

While the government would remain focused on reversing the upsurge in inflation, the Prime Minister said, "We have to learn to husband our fiscal resources prudently." Seeking industry support for taming the price rise, Singh said, "I do not wish to see a return to era of blind controls...At the same time, we have to have the fiscal means to protect the poor from adverse impact of inflation." Despite the crude oil prices ruling in the range of 127 dollars a barrel and causing huge losses to the state-owned oil marketing firms, the government has not been able to pass on the burden due to lack of political consensus.

There are differences within the government also as to how to resolve the crisis. The Finance Ministry is opposed to duty cuts sought by the Petroleum Ministry as also the Left parties..

(BW & PTI)