"The decision finally will have to be taken by the government as a whole. Several ministries are involved in this... I think our role is only to indicate what needs to be done...," he added.
In the Economic Outlook for 2012-13, Prime Minister`s Economic Advisory Council (PMEAC) had suggested that the government could raise diesel prices in one or more steps.
The report said that priority consideration may be given to a suitable increase in the price of diesel, which is being sold at subsidised rates, to contain the fiscal deficit.
Widening fiscal deficit, which touched 5.8% of GDP last fiscal, is a concern for the government.
The government has not been able to implement its decision to free diesel prices because of opposition from various quarters. It had freed petrol prices in 2010.
The government has budgeted a petroleum subsidy of around Rs. 43,000 crore for the current fiscal, but with the huge under-recoveries of the oil marketing companies, the subsidy burden is expected to go up.
To a query related to actions of global rating agencies, Rangarajan said ratings do have implications on borrowing ability of domestic companies.
Rangarajan also projected India`s economic growth in the current fiscal at 6.7%.
The government had earlier pegged the GDP growth at around 7.6%. India`s GDP slumped to a near nine-year low of 5.3% in last quarter of 2011-12.