(Bloomberg) — India’s largest fuel seller raised gasoline and diesel prices after elections in a key state ended earlier this month, fueling inflation fears and threatening growth in Asia’s third-largest economy.
Indian Oil Corp., the de facto price setter for other state-run refineries, on Tuesday raised diesel prices by rupees 0.86 ($0.01) per liter in Mumbai and gasoline by rupees 0.84. That’s the first revision since Nov. 4, and comes after the longest period of unchanged pricing after government-owned retailers transitioned to daily revisions in 2017.
Pump prices are rising globally after a sharp rally in Brent oil, the global benchmark, triggered by the Russian invasion of Ukraine and the US ban on Russian fossil fuel imports. The jump in crude oil prices is likely to trigger a series of surges in Indian pump prices as retailers try to recoup their losses. Oil retailers will have to raise prices by rupees 12.1 per liter in mid-March to break even, ICICI Securities Ltd said. earlier this month in a note.
Rising oil prices are putting pressure on the world’s third-largest crude oil importer, with the rupee being one of the biggest losers against the US dollar in Asia. For the central bank, higher oil prices mean faster inflation, which could test its determination to keep borrowing costs low for longer to support the economy. Headline inflation has already exceeded the upper bound of the Reserve Bank of India’s target of 2%-6%.
The rise in oil prices also affects disposable income in a country where private consumption accounts for as much as 60% of gross domestic product. The crude oil shock could wipe out up to 60 basis points of economic growth in India, according to estimates by Standard Chartered Plc.
While state-run fuel retailers, which control more than 90% of the market, are technically free to align prices with global rates, they often freeze rates ahead of the polls, fearing public scrutiny. responses to higher prices. So despite an increase in international prices, Indian Oil, Bharat Petroleum Corp. and Hindustan Petroleum Corp. opposed a price hike until elections were concluded in five states, most notably in Uttar Pradesh, where voting ended on March 7.
When oil retailers last raised pump prices in November, the federal government softened the blow to consumers by cutting excise taxes on diesel and gasoline. Also this time it will probably do the same, Jefferies India Pvt. said in a note this month.
This post Pump prices in India raised as fuel dealer clings to oil pain
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