Making a case for raising prices of diesel, kerosene and LPG, the Reserve Bank today said hike in rates of petroleum products is necessary to arrest fiscal
slippages. 

"Overall from the perspective of vulnerabilities emerging from the fiscal and current account deficits, it is imperative for macroeconomic stability that administered prices of petroleum products are increased to reflect their true costs of production," RBI Governor D Subbarao said in the Annual Monetary Policy Statement for 2012-13. 

While petrol prices are market-linked, the government fixes the rates of LPG, kerosene and diesel, which results in a large budgetary expenditure on subsidies.