Manmohan Singh defends diesel price hike move, calls it step in right direction

Prime Minister Manmohan Singh, unfazed by large scale protests over diesel price hike, asserted the move was a step in the right direction and expressed hope that economy would rebound in the second half of 2012-13.

The government had on September 14 increased the price of diesel by Rs 5 a litre and capped the use of subsidised LPG cylinder to six in a year per family, evoking sharp protests all over the country.

"The recent increase in diesel prices is an important step in the right direction," Singh said while addressing the meeting of the Full Planning Commission which was called to approve the 12th Five Year Plan document.

The prime minister also made a case for comprehensive review of energy policy saying it was vital for energy security of the country.

Energy, Singh said, "is a difficult area where policy needs a comprehensive review. We are energy deficient and import dependence is going up. It is vital for our energy security that we increase domestic production and also increase the energy efficiency. Rational energy pricing is therefore critical. Our energy prices are out of line with the world prices".

Referring to global economic issues, the Prime Minister said "these short term problems present a challenge, but they should not lead to undue pessimism about our medium term prospects. The economy has gained many strengths. Our immediate priority must be to orchestrate a rebound in the second half of the current year. We should then try to accelerate growth to reach around 9 per cent by the end of the Plan period," he added.

The 12th Plan (2012-17) is proposing an annual average growth rate of 8.2 per cent, which is lower than the earlier estimate of the 9 per cent. The economy recorded a growth rate of 7.9 per cent in the 11th Plan.

According to the Prime Minister, the 11th Plan growth rate was commendable, "for a period which saw two global crises - one in 2008 and another in 2011".

Singh further said that poverty declined twice as fast between financial years 2004-05 and 2009-10 than it did in the previous ten years, while the agriculture grew at 3.3 per cent per year in the 11th Plan, much faster than the 2.4 per cent observed in the 10th Plan.

As regards the growth prospects in the 12th Plan, Singh said, "we must also recognise that the 12th Plan is starting in a year when the world economy is experiencing difficulties and our economy has also slowed down".

Referring to scaling down of the target in the 12th Plan from the original estimate of 9 per cent to 8.2 per cent, he said, "some downward revision is realistic given the state of the world".

Cautioning that growth could slip if adequate actions were not taken, Prime Minister said, "I believe we can make Scenario I (which envisages growth rate of 8.2 per cent) possible. It will take courage and some risks but it should be our endeavour to ensure that it materialises. The country deserves no less."

With inputs from PTI