Diesel price deregulation may force SRTCs to raise fares: India Ratings & Research

Posted By: Religare
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India Ratings & Research has said that the state road transport corporations (SRTC) will be forced to increase fares by over 18 per cent to make up for the recent diesel price deregulation.

Earlier this year in January, Government had decided to sell diesel at market price to the bulk consumers like state transport buses.

In a note, India Ratings & Research said, "State Road Transport Corporations (SRTCs) are the second-largest consumers of bulk diesel in the country (2.192 million tons per annum or 14 per cent of total diesel consumed)."

Post the deregulation and successive hikes, the price of diesel for retail consumers in Delhi is Rs 48.67 per litre. The price of the fuel for bulk users like defence, railways and SRTCs is Rs 51.81 a litre.

"At the aggregate level, without factoring in diesel price hikes, a fare hike of 10.8 per cent is required for SRTCs to breakeven... a fare hike of 18.3 per cent is required for SRTCs to breakeven after a diesel price hike," it said.

Fuel contributes 31.2 per cent to the total cost of SRTCs. Price deregulation would lead to a 6.9 per cent increase in input cost of SRTCs.

"At the aggregate level, a one rupee per passenger kilometre fare increase will reduce SRTCs deficit by around 43 per cent. To completely wipe out the deficit, fare needs to be increased by Rs 2.32 per passenger kilometer," it said.

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