PM for gradual hike in energy prices

Reuters

3 hr ago By Business Line

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Talking about overall subsidies, the Prime Minister said that some subsidies are a normal part of any socially just system, but subsidies should be well designed

New Delhi: Prime Minister Manmohan Singh has given strong indication to increase fuel and electricity prices.
Inaugurating the 57th meeting of National Development Council (NDC) on Thursday, he said, “Our 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 him, 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.
Talking about overall subsidies, the Prime Minister said that some subsidies are a normal part of any socially just system, but subsidies should be well designed and effectively targeted and the total volume must be kept within limit of fiscal sustainability. “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 usages. Explaining this, Singh focused 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 Economic Growth
Terming the modification in 12th Plan annual average growth target to 8 per cent from 8.2 per cent 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 economy will need to grow over 9 per cent in last three year and even more than 11 per cent in last year to achieve annual average of 8 per cent.
Earlier, the Deputy Chairman of the Planning Commission Montek Singh Ahluwalia in his opening remarks elaborated on restructuring of Centrally Sponsored Schemes. He said that on the basis of B.K. Chaturvedi’s Committee recommendations, it is proposed to consolidate Centrally Sponsored Schemes and also to 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.
Prime Minister Manmohan Singh today hinted at tough decisions such as raising energy prices and cut in subsidies to achieve the 8 per cent growth target in the 12th Five-Year Plan.

Inaugurating the National Development Council meeting here today, Manmohan Singh today said the country faces many challenges to achieve sustainable growth.
He said: “Achieving scaled down growth rate of 8 per cent in 12th Plan is an ambitious task. Poverty has declined at a faster rate since 2004, at the rate of 2 per cent every year." “We are reaching a stage when the term 'BIMARU States' can be relegated to history. Determined efforts are needed to raise resources for funding the 12th Plan and early implementation of GST is required".
Hinting at increasing energy prices while addressing the meeting he said, "Immediate adjustment of prices to close the gap is not feasible, but some phased price adjustment is necessary." The Prime Minister said that "Unfortunately energy is under-priced in our country. Coal, petroleum products and natural gas are all priced below international prices. This also means that electricity is effectively underpriced for some consumers. Subsidies should be well designed and kept under fiscal limits."
On women's safety he said, “Safety and security of women is of the highest concern of our Government. The Government has decided to review present laws and examine the level of punishment in cases of aggravated sexual assault."
The NDC, which comprises Cabinet Ministers and state Chief Ministers, is meeting here to approve the 12th Plan (2012-17) document.