NEW DELHI: Finance minister Pranab Mukherjee on Tuesday suggested that the government was open to increasing the fuel subsidy beyond the budgeted level, if needed.
The statement made during an interaction with over 30 institutional investors is likely to provide comfort to oil marketing companies which are saddled with mounting losses due to their inability to align the retail prices of diesel, cooking gas and kerosene oil to global prices. Even the fuel buyer can draw breathe a little easy as the pending hikes might not be as sharp as expected.
Though this does raise questions over the government's ability to meet the annual fiscal deficit target of 4.6% of GDP, Mukherjee tried to allay investor fears saying that despite the increased liability the government would be able to stick to its estimate.
Rising global crude oil prices have fuelled expectations that the government's fuel subsidy bill may mount. Oil marketing firms have raised prices of petrol by Rs 5 a litre and there has been talk of an increase in diesel and cooking gas prices to reduce the losses of state-run oil firms.
While a ministerial panel was scheduled to meet this week to discuss ways to reduce the burden on oil marketing companies, which are selling subsidised diesel and cooking fuel with no government support, the deliberations have been postponed. The move comes as international crude prices are off their recent highs.
Oil companies are losing nearly Rs 18 on every litre of diesel that they sell, while the loss on selling cooking gas is over Rs 300 a cylinder. Although a duty cut is virtually ruled out, oil marketing companies are expected to be allowed to increase retail prices marginally and the government might have to bear a higher subsidy burden to cushion what were the most profitable companies in the country until the policy flip flop on oil subsidy emerged during UPA rule.
Mukherjee told a group of more than 30 leading Indian and foreign institutional investors that the government was committed to reducing the fiscal deficit to the targeted 4.6% of gross domestic product. The fiscal deficit is the gap between the government's revenues and spending. He said the provisional data for 2010-11 which pegged the fiscal deficit at 4.7% of GDP, lower than the estimated 5.1%, had stirred hopes that the government would be able to meet its target set for the current fiscal year which ends in March 2012.
The finance minister also sought to convey a message that the government remained committed to further liberalisation and said consultations were on with regard to further opening up the insurance and retail sectors to greater foreign participation and the centre would make all efforts to build a consensus on these issues. An inter-ministerial group had recently recommended opening up the closely policed multi-brand retail sector to foreign companies as an inflation busting measure.
The veteran Congress leader also assured the investors that inflation was likely to moderate in the months ahead on the back of good monsoon rains which is expected to raise the economic prosperity of farmers. Stubbornly high inflation has emerged as a key policy challenge for the government and the central bank. The Reserve bank of India has raised interest rates nine times since March 2010 to tame inflation.
Mukherjee said it would be premature to judge the success of the disinvestment programme based on only two months of the current financial year and said the centre was committed to pursuing its divestment programme. He said the public issue of the Power Finance Corporation had helped raise Rs 1,145 crore. He said the government did not pursue the share sale programme in the previous financial year as it had received higher than expected revenues from the sale of 3G spectrum.
Volatile stock markets and the global economic situation had fuelled speculation that the government may not be able to meet its target of raising Rs 40,000 crore from share sales in the 2011-12 financial year. The government has plans to sell stakes in several blue-chip state run firms such as BHEL, SAIL and others.
Mukherjee assured the investors that the India growth story was intact and growth would be around 8.5% in the current financial year and there would be no decline in revenue receipts.He said there should not be any undue fear over the fiscal deficit. Economists expect growth to moderate in 2011-12 due to the impact of the aggressive interest rate increases and say growth could be around 8%.
TOI
The statement made during an interaction with over 30 institutional investors is likely to provide comfort to oil marketing companies which are saddled with mounting losses due to their inability to align the retail prices of diesel, cooking gas and kerosene oil to global prices. Even the fuel buyer can draw breathe a little easy as the pending hikes might not be as sharp as expected.
Though this does raise questions over the government's ability to meet the annual fiscal deficit target of 4.6% of GDP, Mukherjee tried to allay investor fears saying that despite the increased liability the government would be able to stick to its estimate.
Rising global crude oil prices have fuelled expectations that the government's fuel subsidy bill may mount. Oil marketing firms have raised prices of petrol by Rs 5 a litre and there has been talk of an increase in diesel and cooking gas prices to reduce the losses of state-run oil firms.
While a ministerial panel was scheduled to meet this week to discuss ways to reduce the burden on oil marketing companies, which are selling subsidised diesel and cooking fuel with no government support, the deliberations have been postponed. The move comes as international crude prices are off their recent highs.
Oil companies are losing nearly Rs 18 on every litre of diesel that they sell, while the loss on selling cooking gas is over Rs 300 a cylinder. Although a duty cut is virtually ruled out, oil marketing companies are expected to be allowed to increase retail prices marginally and the government might have to bear a higher subsidy burden to cushion what were the most profitable companies in the country until the policy flip flop on oil subsidy emerged during UPA rule.
Mukherjee told a group of more than 30 leading Indian and foreign institutional investors that the government was committed to reducing the fiscal deficit to the targeted 4.6% of gross domestic product. The fiscal deficit is the gap between the government's revenues and spending. He said the provisional data for 2010-11 which pegged the fiscal deficit at 4.7% of GDP, lower than the estimated 5.1%, had stirred hopes that the government would be able to meet its target set for the current fiscal year which ends in March 2012.
The finance minister also sought to convey a message that the government remained committed to further liberalisation and said consultations were on with regard to further opening up the insurance and retail sectors to greater foreign participation and the centre would make all efforts to build a consensus on these issues. An inter-ministerial group had recently recommended opening up the closely policed multi-brand retail sector to foreign companies as an inflation busting measure.
The veteran Congress leader also assured the investors that inflation was likely to moderate in the months ahead on the back of good monsoon rains which is expected to raise the economic prosperity of farmers. Stubbornly high inflation has emerged as a key policy challenge for the government and the central bank. The Reserve bank of India has raised interest rates nine times since March 2010 to tame inflation.
Mukherjee said it would be premature to judge the success of the disinvestment programme based on only two months of the current financial year and said the centre was committed to pursuing its divestment programme. He said the public issue of the Power Finance Corporation had helped raise Rs 1,145 crore. He said the government did not pursue the share sale programme in the previous financial year as it had received higher than expected revenues from the sale of 3G spectrum.
Volatile stock markets and the global economic situation had fuelled speculation that the government may not be able to meet its target of raising Rs 40,000 crore from share sales in the 2011-12 financial year. The government has plans to sell stakes in several blue-chip state run firms such as BHEL, SAIL and others.
Mukherjee assured the investors that the India growth story was intact and growth would be around 8.5% in the current financial year and there would be no decline in revenue receipts.He said there should not be any undue fear over the fiscal deficit. Economists expect growth to moderate in 2011-12 due to the impact of the aggressive interest rate increases and say growth could be around 8%.
TOI
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