The government is contemplating an increase in the retail prices of petrol and diesel following the persistent surge in global oil prices in recent months ,with studies carried out by the Petroleum Ministry showing that the overall impact of higher transport fuel costs might not be significantly high.
While the quantum of increase has not yet been decided, the Petroleum Ministry has carried out a study to find out to whether raising fuel prices could worsen the price line in a year when monsoons are expected be weak.
The study looked at six combinations of two broad scenarios -- a one rupee per litre hike each in the price of petrol and diesel and a three rupees per litre increase in each of the transport fuels.
As global crude oil prices breached the $70 a barrel mark earlier this month, from $32 six months ago, state-owned oil marketing companies--Indian Oil Corporation (IOC), Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) are losing Rs 6 per litre on sale of petrol and Rs 3 per litre on that of diesel.
The price of crude oil that India imports ( calculated as a blended average of imports) has shot up 52 per cent since the beginning of the current financial year on April 1 to $71.20 per barrel.
The wholesale price based inflation rate has turned negative, last week for the first time in three decades. For the week ended June 13 it stood at minus 1.14 per cent.
The last time the inflation rate, which measures the rate at which prices change, turned negative was in 1978-79.
The ministry study shows that if prices of both petrol and diesel were increased by Rs 3 per litre, the overall impact on inflation would be around 0.45 per cent.
The government had raised fuel prices twice last year--in February and June--following a sharp increase in global crude prices. These increases were rolled back in two tranches, in December and January.