"Rice prices are going to go up further in the export market. India, which accounts for 40 per cent of world rice exports, on Thursday ordered a halt to its largest rice export category to reduce domestic prices, which have climbed to multi-year highs in recent weeks as erratic weather threatens production. However, the government does impose a tax on the base price of fuel.Asian rice trade paused on Friday to digest the previous day's ban by India, by far the world's biggest supplier, of a major share of its exports of the staple, with prices expected to climb substantially in coming days, three traders said. Since India follows a dynamic system for altering fuel rates, oil marketing companies are mostly responsible for the recent hikes and the government has no control over it. At the moment, Indians pay one of the highest taxes on fuel in the world.
Therefore, the biggest reason behind higher fuel prices in the country is the high rate of central and state taxes.Įven when international crude oil prices plummeted in 2020 due to lower demand, Indians kept paying higher rates for petrol and diesel due to the various taxes levied. Layer of taxesīut the increase in international crude oil rates is not the only culprit behind the exorbitant fuel prices in India, evident from the fact that the country’s fuel rates were significantly lower in the past even at a time when international crude oil prices were higher than current levels. As of today, Brent Crude oil rate stands at $63.21 per barrel. Global crude oil prices have been increasing after Organisation of the Petroleum Exporting Countries (Opec)-plus decided to continue supply curbs.īeing the third-largest importer of oil in the world, the recent firming of international crude oil prices have severely impacted India, where citizens are paying extremely high rates for fuel in comparison to neighbouring countries. International crude oil price including the Indian Basket of Crude, which comprises Oman, Dubai and Brent crude. Why fuel prices are rising in India?įirming of international crude oil rates and extremely high taxes levied on fuel are the key reasons behind the latest round of petrol and diesel price hike in the country. In such a scenario, India’s economy is expected to witness a delay in recovery as it will directly impact the consumption levels among citizens. Although inflation has softened over the past few months, higher fuel costs could again stoke inflation.
If fuel prices remain elevated - especially diesel - experts say that it will lead to a rise in headline inflation. Simply put, from the food you order to the vegetables and fruits you buy, everything is likely to get costlier. According to an Economic Times report, transporters and freighters are seeking a 10-15 per cent increase in freight costs.Ĭonsidering that most products and goods that people use on a daily basis are transported from different parts of the country, their costs are likely to rise further. Demand for increasing product delivery rates has already put consumer-oriented companies in a tough spot. The public transportation sector is already mulling a hike in rates in view of rising operational costs.Ĭompanies engaged in the logistics and transportation of goods are also expected to increase their service rates soon due to the fuel price hike. The rising fuel prices in India will also have a cascading effect on businesses spread across various sectors, ultimately impacting citizens.įor starters, people who do not own a personal vehicle will be impacted as they will have to pay more towards availing public transport. Lower demand will, therefore, lead to widespread job losses in the auto and ancillary sectors. A further contraction in demand for vehicles will have a major impact on the automotive industry and the lakhs of MSMEs that supply goods to the sector. Passenger vehicles and two-wheeler sales have already witnessed a dip in January 2021 and the numbers for this month could dip lower. The high rate of fuel prices will have an impact on the automotive sector - a large source of employment in the country - as vehicle sales may see a sharp drop.
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