"Fuel subsidies are perverse," Rural Development Minister Jairam Ramesh said on Tuesday amid the uproar over petrol price hike , as he pointed out that government spends roughly Rs 1,10,000 crore on such sops.
Warning that the problem will intensify if petrol prices are hiked without touching diesel, he said Rs 67,000 crore is the diesel subsidy, which is more than the amount government spends on its flagship programmes like MNREGA and PMGSY.
Petrol prices may be cut by Rs 2/litre
Favouring a change in government policy on the issue of fuel subsidy, Ramesh, who has been a vocal critic of fuel subsidies , however, admitted that no government could implement such a policy overnight in a country where millions of farmers depend on diesel engines to pump water for their crops.
"I believe that fuel subsidies are perverse subsidies. We spend today roughly Rs 1,10,000 crores on subsidy on diesel, kerosene and LPG which is more than what we spend on rural development programmes," Ramesh told reporters on the sidelines of a function in the national capital.
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"And the more you increase petrol prices without touching diesel prices, you are going to have a problem," he said.
He also said car owners and captive power generators are the two major beneficiaries of Government's subsidy on diesel.
"Diesel subsidy of course today... 15 per cent of diesel consumption is in cars and 8 per cent of diesel consumption is in captive power generation. I mean 23 per cent of diesel in going into areas where diesel should not be used and that is a direct consequence of pricing," Ramesh said.
"The use of diesel in power is a reflection of collapse of our power system and the 15 per cent share of diesel consumption in cars is a direct result of the pricing policy we have adopted," the Minister said.