Planning Commission today said the decision of oil marketing companies to raise petrol price by Rs 3.14 per litre is good news and will provide credibility to the economic reforms process. "What has happened (fuel price hike). on that front it is a good news. I regard that as a vindication.(and) an increase in credibility of basic part of the reforms strategy," Planning Commission Deputy Chairman Montek Singh Ahluwalia told reporters here. State-owned oil companies,including IndianOil,Bharat Petroleum and Hindustan Petroleum,yesterday hiked petrol price citing impact of depreciating value of rupee against dollar on import of crude oil. After the hike,petrol price increased to Rs 66.84 per litre in Delhi. This is the second hike in four months. Oil companies had last increased petrol price by Rs 5 per litre on May 15 this year. On impact of fuel price hike on the automobile sector,Ahluwalia said,"I don't believe that fuel price hike is hurting investment sentiments. We are standing by the signal given by the government that fuel price (in India) will be aligned with global rates." The decision to hike petrol price is in sync with the views of the Planning Commission,which has been advocating that energy prices in the country should be aligned with global rates. Asked if terror strikes would affect investment environment,he said,"I don't think so." Ahluwalia had earlier on Thursday admitted that investment in infrastructure during the 11th Plan period (2007-12) is likely to be 10-12 per cent short of the USD 500-billion target. RBI rate hike not unreasonable: Montek The Planning Commission today said that the decision of the Reserve Bank of India (RBI) to raise interest rates by 25 basis points is not unreasonable and a signal to bring inflation under control. "RBI is signaling their concern about bringing inflation under control. It (inflation) is high. The rate hike is within a range that is not unreasonable",Planning Commission Deputy Chairman Montek Singh Ahluwalia told reporters here. Following the increase announced by the RBI,the short-term lending (repo) rate stands at 8.25 per cent and the short-term borrowing rate (reverse repo) at 7.25 per cent. Ahluwalia expressed optimism that inflation will come down in view of softening of prices across the globe due to prevailing sluggishness in the economy and good harvest expected this year. Headline inflation measured by movement in wholesale prices,was 9.78 per cent for August. "I think on the supply side also good harvest will have positive effect. My guess is that the global transmission of inflation will also be much less. Taking all things together,I think,the inflation will moderate",he added. About the impact of decline in value of rupee against dollar on economy,Ahluwalia said,"(Foreign) reserves are very high so I don't see any panic effect (due to low rupee)." The rupee on Wednesday dipped to a two-year low breaching Rs 48 to a dollar mark. It,however,gained 12 paise and was trading at Rs 47.43 to a dollar.
