New Delhi: Attributing high prices to external factors, the government on Thursday said it is working to moderate food inflation to 5 percent from over 8 percent now without sacrificing growth.


Replying to a debate in Lok Sabha on price rise, Finance Minister Pranab Mukherjee gave details of various steps the government had taken to rein in inflation but did not outline any further strategy in this regard.

"Growth with moderate rate of inflation... that is what we want to achieve," Mukherjee said in nearly an hour-long reply which left NDA "disappointed" and was followed by a walk out by the BSP, SP, BJD, AIADMK and Left parties.

Through a division, the House negative the amendment moved by CPI leader Gurudas Dasgupta which wanted a reference to the "failure" of the government to curb food price inflation. Later, it adopted the motion by voice-vote.

Pointing out that the food inflation has come down from 22 percent in February, 2010 to 8.3 percent in July this year, he said, "I am not accepting it. This is not the bench mark."

Mukherjee said the comfortable level of food inflation is five per cent but six to seven percent can be tolerated.

Responding to the demand for removing subsidy on diesel used by passenger cars, Mukherjee said, "We can accept the suggestion and try to work out what mechanism could be found out so that this section (passenger cars owners) are not subsidised." The Opposition, however, expressed disappointment over Mukherjee's reply as he did not announce any step to contain overall inflation which is currently at over nine per cent for the month of June.

"I had expected that the Finance Minister would announce 10 steps to be taken in the coming days and months to control inflation... not even one has been mentioned. So I express my disappointment... NDA is disappointed," BJP leader and former Finance Minister Yashwant Sinha said.

He also took a dig at BSP and SP, which support the government from outside, for staging walk out, saying they always take such steps to bail out the government.

Earlier, making a strong defence of the steps taken by the government to control inflation, Mukherjee, "There are difficult times...but that does not mean that we should start eating lizard."

Referring to Sinha's contention that growth with high inflation was unacceptable, the Finance Minister said, "Let us not mix up growth (with) inflation. Let us unitedly (deal with the problem). The House is the citadel of democracy... Collectively we will be able to do so."

He refused to accept that low inflation will help bolster growth. "There is no inherent contradiction in growth and inflation," he said.

Reminding NDA of the way Congress supported the Vajpayee government in enacting the Pension Fund Regulatory and Development Authority (PFRDA) Bill, Mukherjee sought support of the Opposition in measures to carry forward reforms like Goods and Services Tax (GST) Bill and banking and insurance
laws. "Please extend your hand of cooperation", he said.

Car owners may not get subsidised diesel

With passenger cars consuming about 15 per cent of the diesel, the Government indicated that it might do away with the subsidy enjoyed by such vehicle owners.

 "...we can accept your (Opposition) suggestion and try to work out what mechanism could be found out so that this section (diesel car owners) are not subsidised," Finance Minister Pranab Mukherjee said replying to a debate on price rise in the Lok Sabha.

The Government gives a subsidy of Rs 6.08 per litre on diesel.

While the prices of petrol are linked to market rates, the government directly and indirectly compensates the oil marketing companies for losses on account of sale of diesel, kerosene and LPG through subsidies and oil bonds.

Under pressure to keep its finances under control the government has already indicated that it was keen on freeing prices of diesel and cooking gas (LPG) but retaining subsidy on kerosene which was used by poor.

In June, while increasing prices of kerosene, diesel and LPG, the government had slashed customs and excise duties on petroleum products to mitigate the impact of price hike on common man. It took a revenue hit of Rs 49,000 core per annum.

India imports about 75 per cent of its total crude oil requirement.  Mukherjee said out of total consumption of diesel, 10 per cent is used by industry, 6 per cent by railways, 12 per cent by the agriculture sector and 15 per cent by car owners.

As much as 8 per cent is used for power generation, he said, adding buses and trucks consume 12 percent and 37 percent respectively.

Mukherjee said that despite price increase of petroleum products in the recent past, the under recoveries of state owned oil companies was still around Rs 1.22 lakh crore.

JD-U leader and NDA convenor Sharad Yadav had questioned the government's policy of providing subsidised diesel for consumption by luxury car owners, telecom tower companies, malls and restaurants.