Finance Minister Pranab Mukherjee,while justifying the fuel price hike, said that the rise would lead to a direct impact of 0.9 per cent on inflation but inflationary pressures particularly on food and primary articles would moderate by July. He added that overall inflation would be moderated by the end of the year.
There will be some inflationary pressure no doubt, said Mukherjee while speaking to reporters here on Monday after a meeting with the chief ministers of central and western zone states and heads of PSU banks and financial institutions to discuss issues related to agriculture credit,financial inclusion,priority sector lending,credit to weaker sections and minorities,and progress of centrally sponsored schemes,and added that the chief economic advisor had told him that the direct impact on inflation would be 0.9 per cent.
A cascading effect may be there on sectors like transport and on price of essentials. He however pointed out that there was hardly any option when it came to increasing the prices of petroleum products.
Mukherjee said the increase in petroleum product prices was necessary to meet the under-recoveries of the Oil Marketing Companies (OMCs). While pointing out that an increase of prices of essential commodities was unpleasant but the bullet had to be bitten,Mukherjee said while the prices of petrol would be market-determined,a gap existed on prices of diesel. He said even after the increase,the subsidy on LPG would be Rs 227 and the subsidy on kerosene would be around Rs 14.80.