Kelkar panel suggests hike in kerosene price

New Delhi: The Kelkar Committee, which was set up by Union Finance Minister P Chidambaram to suggest a roadmap for fiscal consolidation, has suggested the government to hike the prices of kerosene and LPG cylinders with immediate effect.

The panel has recommended that kerosene price should be raised by Rs two per litre while that of LPG cylinders needs to be raised by Rs 50 per cylinder.

According to the recommendations of the Kelkar Committee, the subsidy on kerosene needs to be reduced by one-third by FY 2015.

Reacting to the report of the committee, the Finance Ministry has said that all the recommendations cannot be implemented as some of the subsidies being given by the government are unavoidable.

"The government is of the view that in a developing country where a significant proportion of the population is poor, a certain level of subsidies is necessary and unavoidable, and measures must be taken to protect the poor and vulnerable sections of the society", Department of Economic Affairs (DEA) secretary Arvind Mayaram said on Friday.

He further said committee's recommendation of withdrawal of certain subsidies was in divergence with the stated policy of the government.

The government has invited comments of stakeholders on the Kelkar panel report.

The Committee, headed by former Finance Commission chairman Vijay Kelkar, has suggested phased elimination of subsidy on diesel and LPG in the next four years and reduction in kerosene subsidy by one-third by 2014-15.

In case of food and fertiliser subsidies, the Committee wants the government to increase the urea price and raise issue price of foodgrains at ration shops.

It cautioned that in absence of these measures, the fiscal deficit of the government could shoot up to 6.1 per cent of the Gross Domestic Product (GDP) in the current financial year. It can be contained to 5.2 per cent with the proposed reforms.

The government's guarded reaction to the recommendations comes in wake of widespread protest against its recent decision to raise price of diesel by Rs 5 per litre and capping of subsidised LPG to six per family a year.

(With Additional Inputs from PTI)