The Hindu Business Line : ‘Fuel hike on expected lines’

Mumbai/Chennai/Hyderabad, June 4 Fuel price hike by the Union Government has not taken the industry by surprise: it was anticipated. However, the industry is not happy with the timing as it will add to the inflation. The price hike could further intensify the search for alternative sources of energy.

Talking to Business Line, Mr Ramesh Chandak, Managing Director of KEC International Ltd, said that the price hike was inevitable but should have come 6 to 8 months earlier. Now, both the common man and the industry will face the double whammy of inflation and costlier fuel. It will have a multiplier effect on inflation.

Mr Pramod Chaudhari, Chairman, Praj Industries, said that price hike will defiantly increase company overheads. Increase in diesel prices will have a compounding effect on the cost of raw material and finished goods. Hike in petrol prices would increase companies’ conveyance bills, he said.

For biofuel

Mr Chaudhari, a pioneer in the biofuel industry, said that the Union Government has not paid enough attention to biofuels. Fuel blending could have cushioned the rise in crude prices. About 10 per cent fuel blending could have a positive impact on prices. For the last three years, the government has kept the biofuel policy on hold, he said.

“I feel there are vested interests who are against the development of the biofuel sector as they get benefits from the price hike,” Mr Chaudhari said.

partial correction

Mr Sanjay Kaul, Advisor (Energy and Resources), Deloitte India, said that the price hike was overdue. It is a partial corrective measure for the short term, which could impact the stock market, he said.

Mr Kaul said that in the long term, it is important to recognise the problem and come up with a holistic solution for commercial taxes. The way in which the oil marketing companies manage their efficiencies in the supply chain of petroleum products needs to reviewed.

Currently, the way in which oil bonds and subsidies are given also needs to be addressed. Fuel price rise in the future cannot be ruled out as the current steps do not address the problems of hike in crude oil prices adequately, he said.

Mr B. Santhanam, Managing Director, Saint-Gobain Glass India Ltd, described the Centre’s move as a partial step and said “this pain is an absolute must for the economy”. If the true cost of energy were not reflected in its selling price, there would be distortions in its usage, he said.

President of World Energy Association, Dr Anil Kane said that the price hike was inevitable and that it will give a boost to alternative energy.

“I look at it as an opportunity for renewable energy as this is not the final fuel price hike. It is going to be costlier to burn fossil fuel; it will force people to economise. Alternative fuel could bring the oil producing countries on their knees. It will also open opportunities to Indian oil producers by undertaking oil and gas exploration in unchartered areas in the country,” Dr Kane said.

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