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The Finance Minister, Mr Pranab Mukherjee, has said the Indian economy is resilient enough to deal with the rising crude oil prices that surged to a 30-month high.
“Yes, oil prices are going up but Indian economy has the resilience to deal with the situation when it becomes extremely aggressive,” he said here.
“In the past we have done it. Let us see how we will be doing it,” Mr Pranab Mukherjee said, adding that the Government’s response has to be formalised.
On Thursday, oil prices surged to a 30-month high fuelled by political crisis in West Asia. Brent rose to $119 per barrel, while crude prices were hovering around $100 per barrel.
Meanwhile, the Economic Survey 2010-11 also pointed out that the spiralling crisis in West Asia and rising global commodity prices could increase inflationary pressures at home.
“The inflationary pressures on the domestic front are likely to be exacerbated by the higher levels of global commodity prices,” said the Survey tabled by Mr Pranab Mukherjee in Parliament today.
The spike in global rates has meant that the gap between domestic retail fuel prices and their cost of production has widened, necessitating action — either by way of price increase or hike in government subsidy.
It is estimated that diesel is currently being sold at a loss of Rs 9.23 per litre while every 14.2-kg cylinder of domestic LPG is underpriced by Rs 356.07. Kerosene through PDS is sold at a loss of Rs 21.60 per litre.
The Government in 2008-09 fiscal provided a record Rs 71,292 crore as fuel subsidy out of the Rs 1,03,292-crore total revenue state-owned oil firms lost on selling fuel below cost. During the year, crude oil prices touched $147 per barrel.
This year, the state firms are projected to lose Rs 75,507 crore in revenues and the government has so far sanctioned Rs 21,000-crore fuel subsidy for the first nine months.
State-owned Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation have raised petrol prices, which had been deregulated, by Rs 10.44 a litre in eight instalments this fiscal.
A further hike of Rs 2.50 a litre is needed to level them with global rates. Diesel, LPG and kerosene prices continue to be under tight government control.
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