Steep fuel price hikes spark uproar in Parliament

Economists see steady increases adding up to ₹9 to ₹12 per litre of diesel and petrol

March 22, 2022 11:23 pm | Updated March 23, 2022 08:35 am IST - New Delhi

Rajya Sabha in session on March 22, 2022. Photo: SANSAD TV via PTI

Rajya Sabha in session on March 22, 2022. Photo: SANSAD TV via PTI

After a four and a half month freeze on fuel prices in the run up to five State Assembly elections, India’s oil marketing companies began recovering the higher crude oil costs that have prevailed in recent months on Tuesday, with an 80 paise increase per litre in retail prices for petrol and diesel, along with a ₹50 increase in domestic cooking gas prices.

Both Houses of Parliament were disrupted with Opposition members demanding a rollback of the increases and walking out from the Lok Sabha. Rajya Sabha proceedings were marred by protests by members who also trooped into the well of the House, demanding a discussion on the issue.

Late on Tuesday, Reuters reported that Indian Oil Corporation had notified its dealers of a second consecutive increase of ₹0.80 in the prices of petrol and diesel that would take effect on Wednesday. From Wednesday, a litre of petrol in Delhi will cost ₹97.01, while diesel prices will be raised to ₹88.27, Reuters cited a notification sent to dealers as showing.

Economists expect the gradual fuel price increases to add up to anywhere between ₹9 to ₹12 per litre of diesel and petrol, which could go up to as much as ₹20 a litre if the average global crude oil price rises to $110-120.

Inflation trigger

Such hikes would undo the excise duty cuts announced by the government in early November 2021 and push retail prices past the ₹100 per litre mark for both fuels. The price hikes are expected to feed into retail inflation that has already been over the 6% mark in the past two months, pinching households and denting consumption further.

Petrol and diesel prices were last revised in November 2021, though crude oil prices surged by nearly $30 a barrel since then, soaring even higher than $100 a barrel, following the invasion of Ukraine by Russia. Domestic cooking gas prices have been unchanged since October 2021.

After the initial price increase on Tuesday, petrol in Delhi will cost ₹96.21 per litre as against ₹95.41 previously while diesel rates have gone up from ₹86.67 per litre to ₹87.47. The price of a non-subsidised LPG cylinder has been increased to ₹949.50 for each 14.2-kg bottle in Delhi.

Earlier this week, the price of bulk diesel was hiked by ₹25 per litre, while Aviation Turbine Fuel prices were raised last Wednesday by a record 18%, taking them past the ₹1 lakh per kilo litre mark.

Taking a dig at the government on Twitter, former Congress chief Rahul Gandhi said, “The lockdown on the prices on gas, diesel and petrol has ended. Now, the government will continuously ‘develop’ the prices. If you ask the Prime Minister about the epidemic of inflation, he will say #Thaalibajao”

Dipti Deshpande, principal economist at rating agency CRISIL said the pass-through of rising crude oil prices to domestic fuel prices is ‘inevitable and further hikes can also be expected’ with the impact expected to show up largely in the April inflation data.

“While lower excise duty relative to last year will help moderate the impact of rising international crude oil prices, it will not be sufficient to lower fuel inflation if Brent prices stay above $90 per barrel throughout next fiscal. In that case, the government may need to cut excise duties further to alleviate the burden on consumers,” she said.

Consumption hit

The diesel price hikes will have the highest impact, said Gaurav Moda, partner and energy leader at EY India, as they account for over 50% of transportation fuel in the country. “The rise in logistics cost will have a near direct inflationary pressure across most of the goods we consume,” he noted, adding that LPG prices will hurt the unsubsidised industrial commercial segment.

“Given that the price of crude oil has averaged ~$100 per barrel in the current quarter, a full passthrough would require a ₹9-12 per litre increase in the retail prices of petrol and diesel. And if the average crude oil price rises to $110-120, the hike required would be ₹15-20 per litre,” Hetal Gandhi, director of Crisil Research, estimated.

In the Lok Sabha, Opposition MPs demanded a reversal of the fuel price hikes and staged a walkout. Soon after the Question Hour, Congress leader Adhir Ranjan Chowdhury said the latest hike was on expected lines as the Opposition parties had predicted that prices of diesel and petrol would increase after the Assembly election.

DMK’s T.R. Baalu and Trinamool Congress leader Sudeep Bandopadhyaya too joined in the protest against the fuel price hike and urged the government to rollback.

Rajya Sabha witnessed two adjournments on Tuesday as Opposition members protested against the fuel price rise. The Upper House could function only for a total of 14 minutes in the first half as Opposition members trooped into the well demanding a discussion on the issue.

Earlier when the House proceedings began at 11 a.m., Chairman M. Venkaiah Naidu said that a notice under Rule 267 (suspension of business of the day to discuss the stated matter) was not permitted.

“There was a notice under Rule 267 by Shaktisinh Gohil, Dola Sen, Dr. Sivadasan, Elamaram Kareem and John Brittas about the prices of cooking gas, petroleum and diesel. This is not admitted,” Mr. Naidu said.

This led to vociferous protests and the House was adjourned til 12 noon. When the House resumed, the members continued to protest. Deputy Chair Harivansh requested the members to go back to their seats.

“This is the Question Hour and as you know a lot of money is spent to prepare for this hour, I request the members to go back to their seats,” Mr. Harivansh said. The House was then adjourned till 2 p.m.

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