Mitra warning on fuel price

Spiralling oil prices could slow down the economy and make trade and investment unviable, Bengal finance minister Amit Mitra said on Wednesday, a day after the state effected a token Re 1 cut in petrol and diesel prices.

By Our Special Correspondent
  • Published 13.09.18
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Mitra greets economist Ashok Desai in Calcutta on Wednesday. A Telegraph picture

Calcutta: Spiralling oil prices could slow down the economy and make trade and investment unviable, Bengal finance minister Amit Mitra said on Wednesday, a day after the state effected a token Re 1 cut in petrol and diesel prices.

Mitra said the Reserve Bank of India would soon be forced to raise interest rates to fight the high fuel price-led inflationary expectation, which is hurting small businesses.

Speaking at the annual general meeting of the Bengal Chamber of Commerce & Industry, Mitra accused the NDA government of complete mismanagement of the oil issue, by not taking adequate measures when global crude prices were low.

Mitra drew attention to the strategic oil reserve that the United States had built in the 1970s after the oil shock (Libya crisis). Those reserves in Texas and Louisiana hold over 700 million barrels of oil, which is equal to meet the country's requirement for 60 days.

"India too has a 5.33 million barrel reserve. It could be 10 days at best. Why did not the Government of India further strengthen the reserves during the time crude oil prices fell? So when oil prices are high, you could use it for certain purposes," Mitra asked.

He alleged that the Centre did not look ahead.

"Why not a fuel price stabilisation fund. When oil prices were low, you should have created the buffer. When prices go up, you can use it," Mitra asked.

High oil prices and the sinking rupee against the dollar would stoke inflation leading to the RBI increasing its rates, he said. "Projects may not be viable when RBI hardens the rate. The GDP growth will be negatively hit, it is my big concern.

Noted economist Ashok V Desai, who also spoke at the BCCI meeting, said the government should not tinker with taxes when crude oil goes up or down because nobody can predict it. "The government should keep a constant tax," he said.