News Hour: Petro products, power, coal underpriced; need to hike rates: PM Manmohan Singh

NEW DELHI: Describing the current economic situation as a difficult one, Prime Minister Manmohan Singhtoday hinted at tough decisions like hike in energy prices and reduction of subsidies to achieve the growth target of 8 per cent in the 12th Five Year Plan.

Inaugurating the National Development Council (NDC) meeting, Singh cautioned that "business as usual" policies will not be sufficient to achieve the scaled down growth target of 8 per cent, which he said was "ambitious".

The NDC, which comprises Cabinet Ministers and state Chief Ministers, is meeting here to approve the 12th Plan (2012-17) document.

The Planning Commission for the second time proposed reduction in the average annual growth target for the 12th Plan. It was first scaled down from 9 per cent to 8.2 per cent and now to 8 per cent.

Noting that energy prices in India are "too low", Singh said, "some phased price adjustment is necessary".

The central government and the states, he said, "must work together to create awareness in the public that we must limit the extent of energy subsidies".

The Prime Minister further said that the 12th Plan has made a case for containing subsidy as failure to control them would mean that "other plan expenditures have to be cut or the fiscal deficit target exceeded".

Singh also cautioned that "business as usual" policies will not be sufficient to achieve the scaled down growth target of 8 per cent, which he described as "ambitious" in the current scenario.

This is the second time that the Planning Commission has proposed reduction in the average annual growth target for the 12th Plan. It was first scaled down from 9 per cent to 8.2 per cent and now to 8 per cent.

Noting that India imports oil, natural gas and even coal, Singh said some adjustment in price was necessary to moderate demand of these products and curb imports.

"Energy pricing is critical for both objectives. If domestic energy prices are too low, there will be no incentive to increase energy efficiency or to expand even supply", Singh said, adding the centre and the states need to work together to create awareness in the public about the need to limit energy subsidies.

Energy experts, Singh said, were unanimous that the country cannot expect to achieve rapid, inclusive and sustainable growth if it did not undertake a phased adjustment in energy prices to bring them in line with world prices.

He further said failure to contain subsidy would mean either cutting plan expenditure in other sectors or exceeding the fiscal deficit target.

(source:economictimes.indiatimes.com)