The Planning Commission on Friday said that deregulating fuel prices will soften generalised rise in prices rather than flare up inflation.

"It (decontrolling fuel price) will not flare up the inflation. I just think that it is not sustainable to have prices those are not line with the world prices," said Planning Commission Deputy Chairman Montek Singh Ahulwalia.

"By keeping the price of petroleum down you are actually bearing a subsidy that causes a generalised rise in price... if you get rid of the subsidy there will be rise in petroleum prices but it will soften the generalised rise in prices," Ahluwalia said.

"It (freeing fuel price) is there in the integrated energy policy, we had said that any policy that does not link petroleum and diesel price to evolving trend in world price is absolutely unsustainable," he added.