Paris: Concerned over soaring oil and commodity prices resulting in high
inflation, India Saturday asked G-20 member countries to evolve a
mechanism for stabilising the volatile price movements.
"The best way to cool soaring prices is to boost output with better technology, more competition among more producers and better information," India's Finance Minister Pranab Mukherjee said at meeting of G20 finance ministers and central bank governors on commodities and energy.
He said the volatility emanates from the developed countries as prices quoted by them act as benchmark. This becomes a concern for emerging markets, like India, which are the major commodity importer.
"...Excessive volatility suppresses price signals that equilibrate demand and supply in the real economy and are consequently very destabilising. The G20 needs to urgently develop a consensus on dealing with this threat to strong and sustainable growth," Mukherjee said.
India imports about 80 percent of its crude oil requirements and is grappling with near a double digit inflation.
With regard to fossil fuel subsidies, he said while India was strongly committed to the phasing these out, "we believe there is no one-size-fits-all model to implement fossil fuel subsidy reform," he said.
Mukherjee, however, asserted that there were "no subsidies" on petrol in India any more, while the price of diesel has been continuously increased from time to time.
"However, we need to ensure sustainable energy security for the poor. Even as we remain committed to reduce inefficient fossil fuel subsidies, the use of fuels such as LPG and Kerosene for domestic uses cannot be easily phased out in the near future," he said.
Mukherjee said in India kerosene is used by the poor for lighting purposes and doing away with subsidies would affect them adversely. He also said that subsidising LPG is essential to enable people to switch to cleaner fuels.
"Reducing dependence on fossil fuels subsidies completely is not an option for developing countries at this stage..., especially for countries dependent on fossil fuel imports in the absence of reliable renewable energy," he added.
Earlier in the day, the Indian Finance Minister pitched for enhancing developing nations capacity to absorb capital flows.
Seeking a consensus on the metrics and management of global liquidity, he said "(volatile capital) flows cannot be treated as an exclusive problem of emerging markets as the sources of global liquidity also need to be considered".
He said the G-20 nations need to work out strategy on global liquidity, accumulation of reserves and the reserve currency.
G-20 is a grouping of rich and developing nations that accounts for 85 percent of the global output.