The Hindu Business Line : Fuel price hike unavoidable: India Inc

New Delhi, June 5 The Indian industry on Wednesday termed the fuel price hike as “unavoidable” and said that the move would provide some cushion to the under-recoveries of about Rs 550-600 crore a day that oil marketing companies were facing given the surging global crude prices.

The industry further said that sharing of burden of rising oil prices by various stakeholders would ensure that the direct impact on retail consumers is contained.

The reduction of customs duty and specific excise rate is a welcome measure and shows the Government’s commitment to share the burden of increased global prices, the CII President, Mr K.V. Kamath, said in a statement.

“Global prices have increased steeply in the past year, and the Indian oil basket now costs around $125 bbl. It has been estimated that a 10 per cent sustained rise, if passed through, can add as much as 1.3 per cent to inflation. The impact of expanding subsidies could contribute an additional 2.5 per cent to fiscal deficit,” CII release said adding that India cannot afford to compromise its growth process and needed to better target the subsidy outgo in order that the poor are protected.

The FICCI lauded Government’s multi-pronged approach to deal with the situation through a combination of reduction in excise duty on petrol and diesel, abolition of customs duty on crude in addition to an upward revision in prices. “FICCI has been advocating the need for targeting subsidies to the needy by way of direct cash transfers rather than providing subsidised fuel,” it said.

According to PHDCCI, the measures announced by the Government would help oil companies to cut losses on sale of petrol, diesel and LPG. “Given the hike in global oil prices, which touched an all time high of $135 a barrel, the adjustment of domestic retail price had become inevitable to help contain, to some extent, the staggering revenue losses made by oil marketing companies estimated at Rs 2,46,000 crore in this fiscal due to under recoveries made by oil companies,” Te PHDCCI said but added that hardening of fuel prices would have a cascading effect on the economy which is certain to fuel inflation.

However, Confederation of All India Traders (CAIT) criticised the hike saying the move was unjustified and would put heavy financial burden on the pocket of consumers. According to Builders Association of India, the hike would impact the construction industry as the costs would go up.

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