FPJ BUSINESS DESK Mumbai

A mid widening fiscal deficit, the PMEAC suggested aligning diesel prices to global market in a phased manner and also raising excise and service taxes to pre- crisis level of 12 %. Chairman of Prime Ministers Economic Advisory Council ( PMEAC) C Rangarajan also pitched for freeing urea prices.

Rangarajan said the fiscal deficit was likely to expand beyond the budgeted estimate of 4.6 percent of GDP, mainly because of increased spending on subsidies, especially on refined petroleum products. The government expects that its subsidy bill would increase by Rs 1 lakh crore to Rs 2.34 lakh crore, mainly on account of higher outlay towards fertiliser, food and oil.

" It will be necessary during 2012- 13 to make some adjustments on the diesel prices in a phased manner. We have not done this for quite some time and international crude prices have gone up ... It is not possible for us to subsidise this sector beyond a level," he said.

The centre had cut excise and customs duties to cushion the impact of the price rise, thus sacrificing annual revenues of Rs 38,000 crore. He said the excise duty and service tax should be increased to pre- crisis level, a move which will bring in additional Rs 35,000 crore.