Moody warns govt against roll back

Cautioning the government against roll back of diesel price hike, credit rating agency Moody's said on Thursday that any such step would limit its subsidy reduction plan.

'If the government rolls back a part of the hike, as some coalition partners and members of opposition parties have demanded, the decline in subsidies will be smaller,' Moody's said in its credit outlook report.

Battling huge fuel subsidy payout, the government last week raised diesel prices, first since June 2011, by Rs 5 a litre. Moody's statement comes on a day when opposition parties are observing nation-wide strike to protest against the price hike and government's move to operationalise its decision on allowing foreign direct investment in multi-brand retail. Moody's said the price hike would lower government's subsidy burden by Rs 20,000 crore in the current fiscal to an estimated Rs 1.7 lakh crore. 'Still, the subsidy will be 23 per cent higher than the Rs 1.4 lakh crore for the previous fiscal year,' it said. Moody's said since June 2011, import parity prices, which are used as a reference to calculate the subsidies, have risen by nearly 25 per cent because of higher international diesel prices and the depreciating rupee.