The party time on driving around on cheap fuel seems to be over, though there is no danger of hard times as yet even though the automobile fuel has witnessed about 20% increase in the recent past, an ASSOCHAM paper has said.
Sharp increase in the retail prices of automobile fuel, particularly diesel, the lifeline of the public transport, will have a cascading impact on the prices of a large number of consumer items, particularly food and beverages, further building the inflationary pressure and making the task of the Reserve Bank of India (RBI) difficult in moderating the interest rates, according to the Associated Chamber of Commerce and Industry of India (ASSOCHAM).
While the crude oil prices have shot up by about 20% in the last few months, the auto fuel prices at the filling stations have increased between 12 –18 % in different cities, depending on the level of state levies, adds the ASSOCHAM paper.
It said when the transportation costs go up, typically the entire food basket along with other materials, come under the cascading effect. In the present scenario, the big danger of the rising diesel prices is on the food and food a beverage which, as a group has weight of over 50 per cent in the retail inflation, measured by the Consumer Price Index (CPI).
The price of petrol in Delhi has touched Rs 63.2 per litre in June 2016 from Rs 56.61 in the month of March, 2016 with an increase of 11.3%. In Kolkata, it has risen to Rs 66.44 from Rs 62.32 in March 2016 (6.6%), Mumbai to Rs 66.12 from 62.75 (5.3%) and in Chennai Rs 62.47 from Rs 56.08 (11.3%), reveals the ASSOCHAM findings.
“If the crude oil prices further go up, the government should seriously think of rolling back the duties which were imposed when the prices had touched rock bottom,” ASSOCHAM Secretary General Mr D S Rawat said while releasing the paper.
Similarly, the price of diesel in Delhi has also gone up to Rs 53.93 in June 2016 from Rs 46.43 in March, 2016 with an increase of about 16%. In Kolkata, increased to Rs 56.13 from Rs 49.57 in March 2016 (13%), Mumbai to Rs 59.21 from Rs 53.06 per litre (12%) and in Chennai to Rs 55.44 from Rs 47.13 in March 2016 (18%), adds the chamber.
The crude prices shot up from $25 per barrel to $50 per barrel in last six months on the back of pickup in demand from China, India and reduction in stock piles in US.
If the trends of rising prices continue, the profit margins could be hit since the corporate India is not in a position to pass on the rising raw material cost to the consumers even among the industrialized goods.
India currently consumes over four million barrels of oil a day and is on its way to overtake Japan to become the world’s third-largest guzzler, according to the IEA. An increase in the number of vehicles and growth in refining activities are pushing demand higher.