Fuel price hike almost inevitable: CII

RELATED NEWS Chemical Industry must contribute to uplift quality of life Praj forms JV with Brazilian Engg major for ethanol plants PSU cos hike jet fuel price by up to Rs 6,437/kL Nifty BSE | NSE 25/05/12 Are Mutual Funds betting on Nifty?

The International situation gives a grim outlook on Oil prices, where no significant softening seems to be in the offing. Current prevailing prices of International Crude at around USD 94 combined with India's 70% import dependence is leading to an unsustainable situation on the pricing front, said a CII Press Release issued here today.

CII pointed out that historically there has never been a direct pass through of international prices into the Indian retail market for good reasons. However, given the current prices in the international market, this extent of insulation may no longer be possible for a variety of reasons. The two most compelling ones are that the burden of insulation for the government is becoming unsustainable, and the second is that eventually a play of market dynamics would be the best trigger for prompting conservation.

The CII press release said that India has to, over time, look at reducing its import dependency. For that, the Press Release, stressed on the need for comprehensive conservation measures being adopted by all sections of society including industry. CII has advocated pro-active conservation measures so that the country can look at a tangible target of reducing oil consumption. CII has suggested that the government set a target of curtailing domestic consumption by 10% by 2010.

The release went on to say that the current situation makes a revision in oil prices in India, almost inevitable. CII said that further delay in oil price revision is inadvisable, as it would only make the impact that much worse. However, CII has suggested that any such revision has to be in a manner such that no sector gets into any undue disadvantage, and that the industry and the economy has time to absorb and adapt to the effects of such a price revision

While recommending this, CII has also suggested that the duties and levies on petroleum products need to be carefully examined such that the impact of the potential price revision is shared between the government, the oil marketing companies and the consumers. From that point of view, the decision should be a mix of fiscal and price measures, such that the ultimate impact on retail price is moderate. CII has also asked for rationalization of taxes and levies on petroleum products.

Contd on page 2...