Prime Minister Manmohan Singh gave a clear indication of hikes in fuel and electricity prices in his speech at the inauguration of the 57th meeting of the National Development Council here on Thursday.
“Coal, petroleum products and natural gas are all priced well below international prices. This also means that electricity is effectively underpriced, especially for some consumers. Immediate adjustment of prices to close the gap is not feasible, I realise this, but some phased price adjustment is necessary.”
According to the Prime Minister, energy experts are unanimous that “we cannot expect to achieve rapid, inclusive and sustainable growth if we are not willing to undertake a phased adjustment in energy prices to bring them in line with world prices.”
“The Central Government and the States must work together to create awareness in the public that we must limit the extent of energy subsidies,” he added. On overall subsidies, the Prime Minister said that some were indispensable parts of any socially just system, but should be well-designed and effectively targeted, and the total volume must be kept within the limit of fiscal sustainability. “The failure to control subsidies within these limits only means that other Plan expenditures have to be cut or the fiscal deficit target exceeded,” he said. Limiting subsidies is one of the efforts to make available resources for more productive use. Explaining this, Singh focussed on generating revenues to finance programmes of inclusiveness.
“If growth slows down, neither the States nor the Centre will have resources needed to implement inclusiveness programmes. We will either be forced to cut these programmes, or be pushed into tolerating a higher fiscal deficit, which will have other negative consequences,” he added.
Overall Growth
Terming the modification of the annual average growth target to 8 per cent from 8.2 per cent in the 12th Plan as “reasonable,” Singh said, “Achieving an average of 8 per cent growth, following less than 6 per cent in the first year, is still an ambitious target.”
This can be well understood from the fact that the economy will need to grow over 9 per cent in last three years of the Plan period to achieve the annual average of 8 per cent.
Planning Commission Deputy Chairman Montek Singh Ahluwalia, in his opening remarks, announced the restructuring of Centrally Sponsored Schemes (CSS). He said that on the basis of the B.K. Chaturvedi Committee’s recommendations, it was proposed to consolidate CSS into a smaller number and also increase the degree of flexibility in the guidelines under which these schemes operate.
“It is also proposed to introduce a special flexi-fund window within each flagship scheme, which will give States freedom to experiment and innovate even beyond the flexible guidelines. We expect to implement the new system with effect from April 1, 2013,” he added.
Meanwhile, later in the evening, the Planning Commission clarified that the PM’s statement does not mean that a price hike will happen in a day or two. This can take place only after building a political consensus, it added.