Mumbai, June 28 (IANS) Justifying the recent hike in prices of petrol and diesel, Finance Minister Pranab Mukherjee said here Monday that it was essential to meet the under-recoveries of the oil marketing companies.
Interacting with media persons here, Mukherjee said that the enhancement of prices of essential commodities is always unpleasant, ‘but the bullet had to be bitten’.
He said though the prices of petrol would be ‘market-determined’, a gap of 1.49 percent still exists on prices of diesel.
Even after the latest hike, the subsidy on a cooking gas cylinder would be Rs.227 and Rs. 14.80 on kerosene.
‘There will be some inflationary pressure and according to the chief economic advisor, the direct effect on inflation would be to the extent of 0.9 percent,’ Mukherjee said.
He admitted that the price hike would also have some cascading effect as the cost of transport would go up, which in turn, would affect prices of other products in the economy.
‘However, the overall inflationary pressure would moderate by July, particularly the food inflation and inflation for primary articles, and inflation would reduce to a moderate level by the year-end,’ Mukherjee said.
However, he declined to comment on the possible hike in interest rates in view of the inflationary build-up in the economy and said that the Reserve Bank of India would decide in its monetary policy July-end, based on the economic data.