Fresh oil subsidies could aggravate inflation: PM

"If the fuel prices go up, we have to either raise domestic prices or absorb the increased cost in asking the oil marketing companies to subsidise other elements of the petroleum sector, or from the budget we give additional subsidies," the Prime Minister said. ".... further subsidies can only aggravate the budgetary problem, and if the budgetary problem gets aggravated, inflation will again raise its ugly head," Singh said during his interaction with journalists on Sunday while returning from the SAARC summit in Maldives.

Singh said that one of the reasons for inflation becoming a major problem that concerns "everybody is the rise in prices of fuel products." He said that 75 per cent of the country`s total petroleum product requirements was imported and the government had no control over international prices beyond a point.
"Already the budgetary subsidies amount to Rs 150,000 crore. And quite frankly that is an unsustainable burden.

"Therefore, I would like all our countrymen to recognise that when international prices are rising, and we have no control over international prices beyond a point," he added.

State-owned oil firms recently hiked the petrol price by Rs 1.80 per litre, the fourth increase this year, largely because of rising international crude prices and fall in the rupee valuation.