'Deregulation of diesel prices may push input costs of MSMEs'

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SME Times News Bureau | 24 Feb, 2012
Deregulation of diesel prices at this point may only add to production costs stifling MSME export sector further, FIEO Chief, M.Rafeeque Ahmed said Thursday.

While commenting on the recommendations of the Prime Minister Economic Advisory Council (PMEAC) on the diesel price deregulation, he said that the timing of recommendation is debatable as crude prices are moving southwards and with political uncertainty in the Middle East, there are little chance of cooling of crude prices.

"If prices are deregulated in such scenario, it will push inflation and would add substantially to the cost burden of industry looking at increasing consumption of diesel by manufacturing units with power situation deteriorating day by day," added President, FIEO.

Ahmed said, "We have already suffered 13 policy hikes to curtail inflation which yielded no results except for killing growth with a decline in credit-offtake stalling expansion of industry and employment. A CRR cut will also not bear much result as we see the paradox of a liquidity crunch on the one hand and a reduced credit off-take on the other."

Making a strong pitch for raising diesel prices, Prime Minister's Economic Advisory Council chairman C Rangarajan on Wednesday said there was a need to revise prices to reduce the huge subsidy burden and bring down the fiscal deficit.

FIEO chief stated that by hiking taxes and deregulating diesel rates at this juncture we may only be adding to the woes of the MSME sector and this may quite be the proverbial last straw.

Policy makers in their wisdom need to address the issue with greater sagacity since we have already burnt our fingers with successive policy hikes.