It is high time petrol and diesel prices were decontrolled taking advantage of low inflation and global crude prices, the Economic Survey 2009 said, criticising the government for its "imperfect" handling of the oil price increase.
The survey made suggestions for sweeping reforms in the energy sector, including limiting subsidised cooking gas to domestic consumers to 6-8 cylinders per annum.
Coming a day after the government announced an ad-hoc increase in the price of petrol by Rs4 a litre and diesel by Rs2 a litre, effectively burying all hopes of freeing auto fuel prices, the pre-budget survey said the entire rise in raw material prices should be passed on to consumers.
The doubling of international crude oil prices to $70 a barrel since December had warranted an increase of Rs5.82 a litre in the price of petrol and Rs3.62 a litre in the price of diesel.
The message, "decontrol petrol and diesel prices", was clear, with the survey saying that "as long as domestic prices remain below the cost of import, demand will continue to grow, accentuating the negative impact...
"At times, higher inflation and on other occasions political imperatives have prevented a better alignment of fuel and fertiliser and food prices with the border/market prices."
In practice, issues of prices were addressed somewhat "imperfectly" through a sharing formula that represented a mix of government subsidy, taxation of rents, and some pass- through, the survey said.
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