Rangarajan for revision of retail petro prices

Prime Minister's Economic Advisory Council Chairman C Rangarajan has said there was a need to adjust retail prices of petroleum products in view of the rising international crude prices, even as the finance ministry said that oil prices needed to be watched.

"Some adjustments have become necessary (in response to rising global crude oil prices)," Rangarajan told reporters on the sidelines of a banking conference, adding that the economy would have to learn to live with such shocks. On the other hand, Chief Economic Adviser Ashok Lahiri said, "The global crude price crossing $70 a barrel is not a matter of joy. Let's watch it."

Indian oil marketing companies have not been allowed to raise the prices of petrol, diesel, cooking gas and kerosene in line with the international price movement. Yesterday, the Indian crude basket touched an all-time high of $62.30 a barrel on fears of supply constraints due to Hurricane Katrina in southeast US.

On deposit rates, Rangarajan said there was a need for upward revision since real interest rates were negative in many cases. "For most maturities, the real rate of interest is not positive. This needs correction with some upward adjustments," he said.

Rangarajan said Indian banks would have to evolve appropriate strategies to enable domestic companies to access funds at competitive rates, especially in context of competition from foreign banks in the country.

The finance ministry was sticking to the RBI's forecast of 5-5.5 per cent inflation for this fiscal, Lahiri indicated, though he declined to comment on the impact of global oil prices on inflation that fell to a three-year low of 3.13 per cent during the week ended August 13.

Speaking at the seminar, he said the economy was poised to grow 7-8 per cent in the coming years, but this would require massive investments especially in the power sector. Rangarajan said India requires Rs 9,00,000 crore in investments to bridge the shortage in power.

The bulk of the investments must come from domestic savings, he said, while outlining the importance of banking sector. He also asked nationalised banks to gear up and improve their performance, otherwise they would be losing market share to private and foreign banks.