If you thought Saturday’s hike in petrol and diesel prices was steep, you may be in for more surprises.
A weaker rupee and high global oil prices will further put pressure on the government to raise fuel prices.
Once the monsoon session of Parliament ends on September 6, the government may go for another hike of Rs. 3-5 per litre of petrol, Rs. 2 per litre of kerosene and raise LPG prices by Rs. 50 per cylinder.
Petroleum minister M Veerappa Moily has already written to Prime Minister Manmohan Singh, urging him to take steps to tackle a record Rs. 180,000 crore of losses arising from the fall in rupee and rising crude prices in global markets, the report said.
The Indian currency had rebounded by Rs. 3.15 to Rs. 65.70 over Thursday and Friday after hitting an all-time low of Rs. 68.85 per dollar on August 28, but most experts see the rupee weakening further.
“The rupee is likely to open weak on Monday following the dismal GDP numbers released on Friday. Thereafter, its direction will be determined by global events,” said Anindya Banerjee, currency analyst, Kotak Securities. The rupee is sure to fall further if the US attacks Syria, Banerjee said.
The rupee quoting in the range of 67.06/dollar for one-month futures to 72.34/dollar for 12 month futures in non-deliverable forward (NDF) markets in London, Singapore and Dubai, means traders expect the rupee to fall to these levels in the indicated timeframes.
In addition to the "extremely volatile" exchange rate, the "geopolitical situation in the Middle East is leading to pressure on international oil prices as well,” the Indian Oil Corporation said in its statement while announcing a hike of Rs.2.35 per litre in petrol and 50 paise for diesel on Saturday.
A possible Western military intervention in Syria is primarily a cause of concern for India because of its impact on global oil prices.
Sample this: Just after the US signalled it was edging towards a possible military response to suspected chemical attack in Syria, Brent crude oil prices hit a five-month high above $111 a barrel.
As the threat of war rises, oil prices are expected to increase in tandem.
The combination of a weakening rupee and rising oil prices means an imported barrel of oil now costs India Rs. 7,000. It cost only Rs. 5,500 a barrel in April.