labels: Economy - general
Plan panel suggests hike in fuel prices, freeze on salaries of government employees news
15 November 2007
Mumbai: The planning commission is in favour of an increase in the prices of petroleum products in view of international crude prices nearing $100 per barrel.

"Our view is that energy cost should be passed on to the consumers while providing targeted subsidy to the needy," Montek Singh Ahluwalia deputy chairman of the commission, said on the sidelines of the full plan panel meeting.

"The present policy of insulating the consumers from global price rise is not sustainable as the public sector oil companies bear a large burden of it," he said.

The government''''s subsidy bill on oil and food is set to cross Rs1,00,000 crore this fiscal, Ahluwalia pointed out.

"At the time of the preparation of the 11th Plan document, international oil prices were ruling at $80 a barrel and it has now surged to $98 "and I am not an expert to say in which direction they will move."

Rising subsidies will impact the plan resources, especially for those programmes which are in the social sector if the government did not address the issue, he added.

While the rising foreign exchange reserves may help foot the oil bill, rising subsidies will leave its burden on the budget, Ahluwalia said.

He was also against passing on the whole burden to the consumer as it would raise inflation and reduce demand for fuel.

He said there is no reason to increase the salary of government employees as the wages are already linked to price rise.

"There is no case for pay increase (of government employees) because erosion of income is taken care of by indexation," Ahluwalia said.

"With the Sixth Pay Commission''''s impact looming large, hard-won gains (on fiscal front) could easily be jeopardised," according to the draft eleventh plan document approved by the commission.

Pointing out that the Pay Commissions were relevant earlier when a large portion of the salary was not indexed, Ahluwalia said the sixth pay panel would take into account the fiscal circumstances while making its recommendations, likely sometime in April next year.

The document further stressed it is imperative that utmost vigilance be maintained against any deterioration in the fiscal situation.


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Plan panel suggests hike in fuel prices, freeze on salaries of government employees