The government which had frozen petrol prices ahead of the Karnataka elections, may once again allow free market pricing after May 12, which should put pressure on petrol prices. May 12 is when state elections to Karnataka would be complete.
If the US and Iran do not agree on a nuclear deal, it is expected that crude prices would rally even further, thus pushing retail prices of petroleum products.
It is unlikely that we will see the government cut excise duty. They had already cut the excise duty by Rs 2 and the annual loss by cutting the excise duty is estimated at around Rs 25,000 crores.
It is also estimated that every rise of $1 billion in crude prices, pushes the current account deficit by $1 billion. If the government does not cut excise duty, consumers would have to pay more for the fuel, which could have a bearing on inflation.
However, with elections to key states later this year and also elections to the central government next year it is likely that Oil Marketing Companies are going to bear the brunt of rising crude prices.
It is advised to therefore fill your cars and bikes with fuel, just a day ahead of the Karnataka elections, as after that we could see a spike in prices.
If the Iran US nuclear deal does not go through, expect a further upward momentum in crude and hence fuel prices. The deadline for the deal is the same as the date for the Karnataka elections, May 12.