Petrol, Diesel Prices Will Rise By Rs 9 After Elections? Check This Stunning Research Report By Deloitte!

After the local elections will end next month, Deloitte Touche Tohmatsu India is expecting that the nation’s biggest fuel retailer shall sharply raise pump prices. This move shall in turn add pressure on to the government as well as the central bank to take corrective steps to contain inflation.

In an interview with Bloomberg TV’s Haslinda Amin and Rishaad Salamat, Debasish Mishra, partner at Deloitte said that it is due to the state elections that the retail prices have not been increased. By March 1o when the election process winds down, he expects that the companies shall increase prices as much as by 8-9 rupees (11-12 cents) a liter to make up for a shortfall in sale price.

Prices Frozen For Three Months Now

For over three months now, Indian Oil Corp., Bharat Petroleum Corp. and Hindustan Petroleum Corp. have frozen the gasoline as well as diesel prices despite the surge in international prices due to the coinciding elections in five states.

Notably, Indian Oil Corp., Bharat Petroleum Corp. and Hindustan Petroleum Corp. control more than 90% of the domestic market.

Historically, whenever there are state elections, the state run fuel retailers freeze the prices, despite being technically free to align prices with global rates. This is due to the fear of public backlash over the prices.

Mishra said that whenever there are such rise in prices, the government absorbs part of it by cutting the taxes and rest is forwarded to the consumer.

Increase in Oil Price Impedes Economic Growth

The increase in oil prices is a major problem for a country as disposable incomes are deeply impacted by the same and also that India is a country where the private consumption accounts for almost 60% of gross domestic product. For the central bank, higher oil prices mean faster inflation, which can test its resolve to keep borrowing costs lower for longer to support the economy’s durable recovery from the pandemic.

Mishra said that for every $10 increase in oil price, the economic growth of India is hurt by 0.3% to 0.35%.

Mishra added that beyond $100, there shall be a lot of challenges for the Indian macro-economic scenario. It hurts India as it increases the current account deficit and puts pressure on the retail inflation.