Petrol, Diesel Price Hike Soon? RBI Governor Hints At Fuel Price Hike, Says ‘It Is Just A Matter Of Time...'

If the crisis in West Asia continues for a prolonged period, the central government may consider passing on the fuel price shock to consumers, according to Reserve Bank of India Governor Sanjay Malhotra. Uncertainty surrounding Iran-US negotiations and the blockade of the Strait of Hormuz has raised concerns over a global energy supply crisis.

"If this is to continue for a longer period of time, it is just a matter of time before the government will pass on some of the price increases," Bloomberg quoted RBI Governor Sanjay Malhotra as saying at an event on Wednesday, May 13.

His statement came hours after the central government increased tariffs on gold and silver imports from 6% to 15%. The move is expected to support the Indian Rupee and help narrow India's widening current account deficit (CAD).

RBI Governor On Fuel Price Hike, Inflation

RBI Governor warned that if the crisis in West Asia continued for longer duration, then the central government may consider passing on the fuel price shock to consumers. The central government announced excise duty cut on petrol and diesel last month to reduce the burden on oil marketing companies (OMCs) due to crude oil price rally.

The supply chain disruption due to the West Asia crisis are now beginning to hit India, and inflation can rise in such situation. "We have this framework of flexible inflation targeting, but in such times it's not sufficient," Bloomberg quoted RBI Governor. India's consumer price index (CPI) inflation surged to 3.48% in APril from 3.4% in March.

OMCs Facing Rs 30,000 Cr Loss Every Month

The crude oil price has seen a sharp jump in the last three months as the commodity, which was once trading close to $75 per barrel is now above $100 per barrel. As per officials, the industry players have been incurring the additional cost so far and had not increased the petrol diesel price so far. The excise duty cut on petrol and diesel offered some short-term relief to OMCs from the crude oil price shock. However, these firms are still facing massive loss on a daily basis.

The petrol pricing pressure is growing day by day as top OMCs (including Indian Oil Corporation, Bharat Petroleum, Hindustan Petroleum) are estimated to be losing nearly Rs 30,000 crore every month. "OMCs are facing under-recoveries of nearly 30,000 crore per month," India Today quoted a source. The mounting loss due to widening gap between controlled pump prices and surging import costs has built up over recent months.