With oil marketing companies losing at least Rs 14 per litre on petrol and Rs 42 per litre on diesel, the retail fuel prices could see a further rise in the country
The BJP-led NDA government’s decision to hike petrol and diesel prices by Rs 3 after absorbing the impact of soaring global crude oil prices is likely to have a cascading effect on the overall economy, affecting household budgets.
With oil marketing companies losing at least Rs 14 per litre on petrol and Rs 42 per litre on diesel, the retail fuel prices could see a further rise in the country.
Despite the government not passing on the crude oil price hike, wholesale inflation surged to 8.3 per cent in April, its fastest pace in three-and-a-half years. Though wholesale inflation does not guide the Reserve Bank of India’s decisions on interest rates or the government’s fiscal policy, wholesale inflation indicates supply side pressures and serves as a diagnostic tool of the broader economy.
As the global oil supply situation is not expected to return to the pre-war situation for the next few months, energy prices could remain elevated throughout 2026, with colder regions adding further pressure to oil prices after October.
With the government finally increasing prices of petrol and diesel, the impact of higher fuel prices could be passed on to farm produce and manufactured goods. It will have an impact on retail inflation and force the RBI to increase interest rates.
The Indian economy has always suffered when crude oil prices shot up. As almost 90 per cent of the oil demand comes from the transportation sector, the government must crack down on non-essential travel within the country, if it is really resolute enough to save the economy from the oil surge.
The government should also force freight companies to immediately shift to container trucks which could be transported to longer distances through rail freight. Though such a shift will take time, the demand for containers for lakhs of trucks will boost commercial activity in the country and provide an impetus to the economy.
Extraordinary situations warrant extraordinary solutions. The government needs to decide whether it wants to save the economy or remain popular.
