Bad energy policy in India partly responsible for high inflation, interest rates, says Kirit Parikh

Express news service Posted online: Saturday, Jan 11, 2014 at 0000 hrs
Gandhinagar : Bad energy policy is partly responsible for the high inflation and interest rates prevailing in the country, Kirit Parikh, an economist and chairman of Delhi-based non-profit advanced research institute, Integrated Research and Action for Development (IRADe) said in the state capital on Saturday.

"Our bad energy policy is partly responsible for the high inflation and high interest rates prevailing in the country. We are subsidising all kinds of energy consumption. The under-recoveries of oil has been growing and this year it is about Rs 116,000 crore. It is expected to be of the same order next year as well. Yet, we have various kinds of subsidies been given in name of poor. Most of them do not reach the people," said Parikh while addressing the inaugural session of a conference on energy and infrastructure at Pandit Deendayal Petroleum University (PDPU).

Parikh who is also a former member of the Planning Commission of India said subsidies provided by the government were leading to higher fiscal deficit, which in turn were causing higher inflation and interest rates.

"According to the study we did for diesel, if the diesel prices were to be increased to the full market price, then three months down the line, we may have a higher inflation of two percentage points, but in about eight quarters or within a two year-period, this inflation will come down by six percentage points," he said.

Talking about the high imports of coal which was adding to the fiscal burden of the government, the official from IRADe said, "Despite having large coal reserves in the country, it is amazing how the coal imports of the country rose suddenly. Today about 100 million tonnes of coal is being imported. We have actually punished ourselves in a bad way by importing a lot of coal prompting the international prices to jump from USD 40 to 100 for a ton of coal."

"Denationalise coal; let private companies come in; simply laws. We can bring in new technology and we can produce the coal we need. It is amazing that the 12th Plan speaks about the country importing 170 million tonnes of coal in the last year of the plan-period. The Plan should have in fact spoken about how we could become self-reliant by exploiting our reserves," Parikh said

He also felt that the "policy uncertainties" were preventing large oil majors from coming into India for exploration.