Petrol And Diesel Prices Raise: The petrol and diesel prices in India will be raised for the first time in more than four months, Reuters has reported. The hike is likely to take effect after the end of assembly elections on Monday, March 7.
Despite soaring global crude prices following Russia’s invasion of Ukraine, the fuel prices in the country have remained unchanged. This situation has continued to unravel after Russian President Vladimir Putin announced the “special military operation”, leading to growing concern over inflation.
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“The oil companies would be free to raise prices in a phased manner after the election is over on March 7, Reuters quoted a senior government official with the knowledge of internal discussions on oil prices as saying.”
The fuel prices have not been raised since November 4 last year. The Government of India, on the eve of Diwali, had announced a reduction of central excise duty on petrol and diesel by Rs 5 and Rs 10 respectively.
The move was also seen as being taken in view of the crucial assembly elections in five states including the most populous Uttar Pradesh.
On February 24, oil prices surged as a result of Russia’s invasion of Ukraine. Brent rose above $116 a barrel, while supply disruptions have hit global prices leading to worries over a major setback to the post-COVID economic recovery.
Reuters reported that oil companies have told the Union government that they need a price increase of 10-12 rupees per litre for petrol and diesel in order to break even.
The government is unlikely to cut fuel taxes before the end of the fiscal year, considering the impact on state revenues, according to the report.
“The budget official said that there may be a proposal to cut fuel tax in April,” Reuters quoted the official as saying.
Growing Inflation Fears
Growing Inflation Fears
An increase of 10% in pump prices is likely to lead to a 50-60 basis point increase in retail inflation, as consumers reduce their spending on durable and luxury items.
The Reserve Bank of India’s tolerance band was crossed by India’s retail inflation rising to a seven-month high of 6.01 per cent year-on-year in January, pushed by rising fuel and manufacturing prices.
Saugata Bhattacharya, chief economist at Axis Bank, said that rising retail fuel prices would have a direct impact on prices of household goods and services depending on energy intensity.
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