Govt formation in poll states over, fuel prices raised across the board

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NEW DELHI: State-run fuel retailers raised fuel prices across the board on Tuesday, a day after the ruling BJP completed selecting chief ministers in all the four states it won in the recent assembly polls, inviting a howl of protest from the Opposition.
The first price increase in five months saw retailers raising the base price of petrol and diesel by 80 paise a litre. The actual increase at the pump will be higher by a few paise in accordance with the incremental impact of VAT in each state.
The price of household LPG (liquefied petroleum gas) refills has also been raised by Rs 50 each, marking the first increase in nearly six months. LPG prices are at record levels after the hike and the consumers will have to bear the entire brunt since the subsidy was removed from May 2020.
The sharp increase, though unavoidable, will dent household budgets by making goods and services costlier. PHDCC president Pradeep Multani said the price-cost margins of businesses will be impacted as raw materials and utilities will cost more.
Costlier fuel will also stoke inflation as LPG, petrol, diesel and jet fuel — the prices of which were raised by 18% last week — have a weight of 6.8% in the wholesale price index. This could prompt the RBI to tighten monetary policy, which will impact interest rates and instalments.
The inflationary pressure could rise further in the coming days as fuel retailers are expected to raise prices further to cover a better part of their under-recovery, currently estimated at Rs 18-20. Global prices are also not showing any sign of coming down any time soon.
Petrol and diesel prices had remained static since November 4 as state-run retailers, who control 90% of the market, did not revise pump rates under an informal government directive in spite of a 53% increase in their crude cost.
The Indian Basket, or the mix of crude bought by domestic refiners, was at $84/barrel on November 4, when the Centre and states cut fuel taxes. Government data available till March 18 shows it has climbed down to $108 after hitting a peak of $130 on March 7.
Going by the experience during the previous rounds of state polls, consumers were bracing for pump price revisions to begin from March 8, a day after the polls in UP, Punjab, Uttarakhand, Goa and Manipur ended. But sources said the government wanted to avoid giving the impression that fuel prices were frozen due to political expediency.
Last week, oil minister Hardeep Puri had referred to the November 4 tax cut and assured the Rajya Sabha the government would do “all that is needed” to cushion consumers from a fuel price shock in the coming days.
CRISIL Research said if global oil prices stay above $90/ barrel throughout the next fiscal, the government may have to cut excise duty further to ease the burden on consumers.





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