Petrol, Diesel Price Hiked For 4th Time In 5 Days: Becomes Costlier By Rs 3.20 Since March 22 | What Next?
In just a period of 4 days, petrol and diesel has become costlier by Rs 3.20 per litre. This comes post the state run oil companies raising the rates by 80 paise a litre for the fourth time since March 22.
Till March 22, for a period of 139 days, the state-run oil companies put a pause to the daily pricing mechanism.
On Saturday, Petrol prices surged to Rs 99.6 a litre in Delhi. This was more than 2.51% jump since March 22, while diesel rose to Rs 89.87 a litre, a 3% spike in the same period.
With benchmark Brent losing 2.1% to close at $119.03 a barrel on Thursday, companies still raised the fuel rates on Friday even as international oil prices softened the previous day.
“Calibrated” Increase in Fuel Prices
The domestic retail prices of the state run fuel retailers are aligned with their respective benchmarks of the previous day.
For a barrel, Brent further fell by 0.12% to $118.88 on Friday opening. However, according to the executive, the retail prices of fuel in India shall be increased gradually in a calibrated manner. This is to be done to recover the revenue losses, as daily changes in fuel rates were frozen for almost four-and-a-half months since November 3 last year for political reasons.
There were some private fuel retailers like Shell, Nayara Energy and Reliance-BP who were on the verge of shutting shops as they could no more afford to sell fuel at losses like the dominant public sector players who continued to do so. Hence the decision of state-run oil marketing companies (OMCs) to start increasing fuel rates came as a big relief especially to the private fuel retailers.
Nearly 90% of 81,699 fuel pumps across the country are run by the public sector retailers Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd, and Hindustan Petroleum Corporation Ltd who enjoy a monopoly in the domestic market. After the conclusion of assembly election results on 10th March, these three entities lifted the price freeze on daily change in fuel rates.
IOC is the largest fuel retailer in the country and fuel prices at its pump in Delhi are the national benchmark. In order to anti-competitive laws, other state-run firms keep their rates marginally different. Because of the variation in the state-specific value-added tax (VAT) and other levies such as transportation charges, fuel rates may vary from place to place.
Unavoidable Price Hikes Could Stoke Inflation
Chief policy advisor at EY India, DK Srivastava said that the hikes in petrol, diesel and cooking gas (LPG) rates was unavoidable and they may stoke inflation.
He said that “The ongoing pressure on the Indian crude basket due to the global developments will have adverse growth and inflation effects. Our estimates for FY23 suggest that if the price of the Indian crude basket increases by US$25/bbl, with reference to a baseline of US$75/bbl, growth may fall by about 70 basis points and CPI inflation may increase by 100 basis points.”
Along with the first hike in petrol and diesel rates, the prices of the cooking gas was also raised by Rs 50 per cylinder to Rs 949.50 per refill. Previously, the price of cooking gas was revised on October 6, 2021.
Srivastava added that “The RBI Professional Forecaster’s Survey projected a CPI inflation range of 4.4-6% for FY23. Given the recent CPI inflation trends, the likelihood of reaching the upper level of this range seemed strong even before the current global crisis. With an additional increase of 100 basis points, consumers and industrial users may experience an impact to their existing budgets and cost estimates, unless the central and state governments absorb this pressure by reducing excise duty and VAT on petroleum products”.