Here's Why Fuel Prices Are Hiking Daily After A Rate Freeze Since November 2021

In India, petrol and diesel prices recorded a hike of 80 paise a litre each making a total rise of Rs 5.60 per litre in the last nine days. Petrol in the national capital will now cost Rs 101.01 per litre, while diesel has gone up to Rs 92.27 as per a price notification of state fuel retailers.

The fuel rates have increased across the nation and vary from state to state, depending upon the incidence of local taxation.

Rates Were Frozen Since November 2021

In India, the petrol and diesel prices have been frozen since November 2021, despite the spiralling cost of raw materials. In early November, the international oil prices soared from around USD 81-82 a barrel to USD 120 now.

The freeze was induced ahead of the assembly polls in five states: Uttar Pradesh, Goa, Uttarakhand, Manipur, and Punjab. Rates are supposed to be revised on a daily basis and were expected soon after the election conclusion on March 10, but it was put off by a couple of weeks.

Why The Hike Now?

During election campaigning, the state-owned fuel retailers kept the prices frozen despite surging international rates. However, now, retailers such as Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Ltd (HPCL), and Bharat Petroleum Corporation Ltd (BPCL) are passing on the required increase in stages.

According to a PTI report, last week, Moody's Investors Services stated that during the polls, the state-owned fuel retailers lost around Rs 19,000 crore (USD 2.25 Billion) in revenue for keeping the prices frozen, reported India Today.

What Do Experts Have To Say?

The PTI report quoted Kotak Institutional Equities, saying that oil companies will have to increase diesel rates by Rs 13.1 to Rs 24.9 per litre and Rs 10.6 to Rs 22.3 a litre on gasoline (petrol) at an underlying crude price of USD 100-120 per barrel.

Likhita Chepa, a Senior Research Analyst at CapitalVia Global Research, said, "Fuel prices have been hiked after a long time even though the crude prices have increased tremendously. The prices hike can add more to the already high inflation. The consumption demand has decreased because of the high inflation. The government has been very cautious recently in increasing the prices as they realize that inflation can reduce the demand further, which can hurt the economic recovery of India," quoted The Times of India.

Also Read: Besides Petrol & Diesel, LPG To Cost Rs 50 More; First Hike After 137 Days