Why India's truck operators are expecting hike in diesel prices
What's the story
Truck fleet operators across India are preparing for fuel rationing and a major increase in diesel prices, the first of its kind in four years. The impending change comes as the Middle East conflict continues to disrupt global oil supplies. Despite being one of the most vulnerable countries to this trade disruption, India has so far managed to avoid widespread price hikes at petrol pumps.
Policy response
Absorbing losses
The Indian government has been shielding consumers from the impact of rising oil prices by asking state-run refiners to absorb losses. However, this could change after key elections in the coming weeks. A price hike by these government-owned refiners would further add to inflationary pressures on the economy. Truck drivers have already started reporting informal rationing, which delays deliveries as they are forced to stop more frequently for refueling.
Economic implications
Fleet could go idle
Shailendra Gupta, an executive member at All India Motor Transport Congress, a truckers' lobby group, has predicted a diesel price hike after the elections. He warned that if fuel prices are increased, nearly 30% of the fleet could go idle. This is particularly concerning as trucks account for nearly 70% of India's freight movement and diesel is the lifeblood of this sector.
Market reactions
Private players hike prices
Private players like Nayara Energy have already hiked pump prices, while Reliance Industries and its partner BP Plc have rationed supplies. Ajay Bansal, President of All India Petroleum Dealers Association, said there was no rationing at state outlets but they were feeling the impact from other restrictions. He added that an abnormal spike in demand at state retail outlet pumps may have led to dry-outs at some outlets and forced them to curtail sales.
Consumer advice
Government urges citizens not to panic buy fuel
In light of the current situation, the Indian government has urged citizens not to panic buy fuel. It also assured that retail outlets are operating normally and there is no increase in regular retail prices for petrol or diesel. The government has already cut taxes on petrol and diesel and raised export levies to protect consumers from rising oil prices.
Future projections
Economists predict pump price hikes
Economists at Standard Chartered have predicted that if crude oil averages $95 a barrel in this fiscal year, the government may have to raise pump prices by ₹8-15 per liter for petrol and diesel. Higher cooking gas prices could also be on the cards. Even if crude averages between $85-$90 a barrel mark, retail fuel prices may still have to be increased by ₹3-7 per liter, they added.