New Delhi:  Widespread opposition notwithstanding, Prime Minister's Economic Advisory Council Chairman C Rangarajan has strongly favoured an immediate increase in prices of diesel and cooking gas to contain government expenditure.

"It (increase in prices of diesel and LPG) should be done, as early as possible...We need to take action....

howsoever unpleasant it may be," he said in an interview to Karan Thapar's 'Devil's Advocate' programme on CNN-IBN.

Hiking the prices of diesel and cooking gas, Rangarajan said, was necessary to cap subsidies and contain fiscal deficit at 5.1 per cent of the GDP during 2012-13. The fiscal deficit was 5.76 per cent in 2011-12.

"There is a need to raise the prices because the fiscal deficit can be contained only if we act on cutting subsidies and the most important element in subsidies is the petroleum subsidy. Therefore, there is a need for action with respect to the prices of diesel and LPG," he said.

While petrol prices were freed in 2010, government continues to fix the retail price of diesel, LPG and kerosene.

The oil subsidy is estimated to cost the exchequer over Rs 60,000 crore in the current fiscal.

Although the government has taken an in-principle decision to deregulate price of diesel, it could not implement the same because of opposition from political parties, especially BJP.

Rangarajan also favoured giving a push to reforms in multi-brand retail, pension and insurance and other sectors to promote growth.

"We need to push it (reforms) further. If we had grown at 9 per cent during the earlier regime, we should be able to grow even now. But certainly, reform is a continuing process and we need to take action in various fields, such as banking, insurance, pension and get the consent of the people to these reforms," he said. .