PM's Official Speech

My Fellow Citizens,

It has been some time since I have had the opportunity to speak to you. In the time that has gone by, our country has marched forward as one of the world’s fastest growing economies. This has enabled us to generate revenues that have been invested for the welfare of our people - in employment generating programmes, in farmer’s welfare and in building our social and economic infrastructure.

As I speak to you today, I feel confident that the people of India will continue to demonstrate their creativity and potential for high growth. I assure you that our Government will continue to pursue policies that will make our growth process more socially inclusive; more meaningful to all sections of society; more beneficial to our farmers, artisans, and industrial workers.

In the past four years, we have vastly expanded programmes which directly affect the poor and marginalized sections of society. We now have a universal rural employment guarantee of 100 days which is a unique social safety net for the rural poor. Farmers and agriculture are getting attention unprecedented in the last two decades.

The result is that agricultural production is rising much faster now than a decade ago. The education system has been has been expanded at all levels and we have tried to ensure that the nutritional status of our children improves through a universal mid-day meal programme. Bharat Nirman and the National Rural Health Mission and the Jawaharlal Nehru Urban Renewal Mission aim to provide better infrastructure and health care facilities in rural and urban areas. I am sure that all these efforts have started to bear fruit and no one can deny that we are moving in the right direction to eliminate poverty, ignorance and disease.

My Fellow Citizens,

However, I fully share with all of you your concern that in recent months, higher growth has been accompanied by higher inflation. Our government has taken several measures to insulate the less privileged in our society from the full impact of higher inflation.

You are all aware that two important external factors have been responsible for higher inflation. First, rising food and commodity prices around the world and second, rising world oil prices.

Our government has taken many steps to increase food production and procurement, limit food exports and strengthen the Public Distribution System. All these steps, along with positive expectations of a normal monsoon, have already had a positive impact on food price inflation. I am confident that in months to come there will be further stabilisation in food prices.

Our economy is largely self-sufficient in food. We produce enough to meet our needs. For this, we salute our farming community. Our government will continue to empower our farmers and enhance their welfare. We will continue to give a fair price to our farmers for their produce. This will certainly lead to some rise in prices of foodgrains but this is the only way in which we can incentivise higher production and assure the food security of our people.

However, in the case of oil, nature has not blessed us in the same manner. We remain dependent on imports. We are, therefore, vulnerable to global trends in oil prices. When our government came to power in May 2004, we faced a price of $ 39 per barrel for crude oil. Today, that price has gone up to over $ 130 per barrel – an increase of over three times.

This global Oil Shock has imposed a huge burden on our finances and on the financial resources of our Oil Companies. In the past year alone, as oil prices doubled, our Government did not make any adjustments in the price of petrol and other petroleum products. Kerosene prices have not been touched in four years.

Our Government is committed to ensuring that the impact of this global Oil Shock is minimal. We wish to protect as large a section of our society as possible from its effects. This has been at great cost to government finances and to the economy as a whole.

However, business cannot go on like this for ever. We need to learn to adjust to this new international scenario. We need to be efficient and economical in our use of energy. And we need to pay the economic cost of petroleum products. There are limits to which we can keep consumer prices unaffected by rising import costs. Our oil companies cannot go on incurring losses. This way, they will have no money to import crude oil from abroad.

To compensate them, the Central Government has reduced taxation of petroleum products to the extent possible. But given the commitments of the government for vital development and non-development expenditure, taxes on petroleum products cannot be completely eliminated. Thus a rise in prices is inevitable.

However, it has been our endeavour to raise the prices only by a moderate amount. Price of petrol has been raised by Rs 5 per litre, of diesel by Rs 3 per litre and of an LPG cylinder by Rs 50. Prices of kerosene, a vital fuel for the poor, remain unchanged. We continue to bear a subsidy of Rs 250 per cylinder of LPG and almost Rs 20 per litre of kerosene. It must be appreciated that what has been done is the bare minimum, with a substantial burden being borne by the government and the oil companies.

The Central Government, oil companies and consumers are bearing a part of this immense burden. It is therefore incumbent upon state governments, many of whom tax petroleum products substantially, to also contribute to this national effort by suitably reducing state taxes and levies.

My Fellow Citizens,
Taken together, this entire effort will only bridge a tenth of the uncovered gap of over Rs. 200,000 crores. There is still a gap of almost 90% which has to be bridged. This 90%, amounting to almost Rs 180,000 crores, is being bridged by the government. The cuts in excise and customs duties will cost Rs 22,000 crores to the government. The remaining gap of Rs. 150,000 crores will be met by a combination of lower profits for oil companies and compensation to them by the government in the form of oil bonds.

My Fellow Citizens,
I know that the price increases we have had to announce today will not be popular, even though they are only modest. You must remember that the Government is bearing the burden of issuing Oil Bonds. Our oil companies are making a large sacrifice and are under severe stress.

However, I would like the nation to remember that issuing bonds and loading deficits on oil companies is not a permanent solution to this problem. We are only passing on our burden to our children who will have to repay this debt. Cutting down on the returns of our oil companies will choke a sector vital for the growth of the economy. We need more corrective measures in future on many fronts. In the long term, our country must have a sound strategy for energy security.

To begin with, each one of us can conserve energy and contribute to national security. I urge every citizen to conserve energy at every step, every minute of the day. Be it petrol, diesel, kerosene, LPG, electricity or even water – let us learn to save and use efficiently. Let us reduce wasteful consumption of petrol.

Finally, we have to develop alternative sources of energy, whatever be the source. We cannot remain captive to uncertain markets and unsure sources of supply. We have to develop renewable sources of energy, including nuclear energy.

My Fellow Citizens,
Today more and more of our people are enjoying the fruits of development. It is the responsibility of the Government to ensure a secure future for all our people and for future generations. We cannot think only for ourselves, for the present, for the here and now. We must think about what is good for future generations - for the welfare and security of our children, grand children and their children. It is our duty to ensure their food security and energy security.

The steps taken today are part of that process. I hope each one of you will strengthen our hands in building a strong, secure and caring India. An India where the aam aadmi feels safe, secure and hopeful about the future.