Under all-round attack for hiking the petroleum prices, Prime Minister Manmohan Singh on Wednesday said though unpopular, it is "inevitable" to ensure uninterrupted fuel supply.

"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," the prime minister said in an address to the nation.

"I know that the price increases we have had to announce today will not be popular, even though they are only modest," Singh said his address explaining the circumstances which forced the United Progressive Alliance coalition government for a hefty fuel price revision.

With the Centre having taken a revenue hit of Rs 22,660 crore (Rs 226.60 billion) by cutting duties, the prime minister asked the states governments to reduce their taxes and levies as well.

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

Within hours of the decision taken by the Union Cabinet, the Left-ruled West Bengal government slashed sales tax on petrol and diesel by up to 5 per cent giving a relief of Rs 2.12 and Rs 1.38 a litre on the two fuels.

With the Indo-US nuclear deal in limbo because of opposition by the Left parties, the prime minister sought to garner support for the country going for nuclear energy.

"We cannot remain captive to uncertain markets and unsure sources of supply. We have to develop renewable sources of energy, including nuclear energy," he said.

The prime minister said the central government has reduced taxation of petroleum products to the extent possible. But given its commitments for expenditure, taxes on petroleum products cannot be completely eliminated. "Thus a rise in prices is inevitable," he added.

He said though there could be "some rise" in prices of foodgrains, the UPA government would continue to give a fair price to farmers.

"This is the only way in which we can incentivise higher production and assure food security of our people," Singh said, adding the higher growth of Indian economy has been accompanied by higher inflation.

Singh said the Indian economy is largely self-sufficient in food, but is not blessed in a similar manner as regards oil.

"We are therefore vulnerable to global trends in oil crisis," he said, adding that in the past four years the crude oil prices have increased over three times from $39 per barrel in May, 2004 to $130 per barrel.

However, the government has ensured that the impact of the global oil shock is minimal on the people and the government wants to protect a large section of the society from the impact of the global oil spikes.

This has been at a great cost to the government finances and to the economy as a whole. But "business cannot go like this forever."

"We need to learn to adjust to this new international scenario. 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," he said.

The prime minister also appealed to the people to conserve energy. "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."

Singh said two important external factors have been responsible for higher inflation. These are rising food and commodity prices around the world and increasing world oil prices.

He said the government has taken several steps to increase food production and procurement, limit food exports and strengthen the Public Distribution System.

"All these steps, along with positive expectation of a normal monsoon, have already had a positive impact on food price inflation. I am confident that in the months to come there will be further stabilisation in food prices," he said.

The prime minister said that India has become one of the world's fastest growing economies, enabling the government to generate revenue which has been invested in employment generating programmes and building social and economic infrastructure.

• Full text of PM's address to the nation
• Petrol up Rs 5, diesel up Rs 3 a litre; LPG up Rs 50
• Inflation, the silent killer: Complete Coverage