Big worry for consumers, diesel prices surge by Rs 1.48/ltr, no slowdown in sight
Many expected the Karnataka poll to bring in some good news however, even the prospect of an NDA government coming to power has failed to ease diesel prices.
Diesel prices in India are at levels that have rarely been witnessed before, but since the start of 2018 there is no stopping the rate hikes of this crucial product. It needs to be noted that for the Indian government, fuel is a major generator of revenue and that is why the authorities have been reluctant to provide relief. Many expected the Karnataka poll to bring some good news however, even the prospects of an NDA government coming to power has failed to ease rates. The rise of diesel prices have become a crucial state for the NDA government, heading into the 2019 general elections.
Today, diesel price in New Delhi was at Rs 67.31 per litre, higher by 23 paise compared to previous day price of Rs 67.08 per litre.
Similarly, diesel price in Kolkata was ruling at Rs 69.86 per litre today, which was up 23 paise against previous day's price of Rs 69.63 per litre. This city is at the cusp of clocking Rs 70 per litre rate after Mumbai and Chennai respectively.
Furthermore, Mumbai saw the most hike compared to other metro cities by 25 paise to Rs 71.67 per litre as against Rs 71.42 per litre of previous day. Looking at the trend, we might well witness Rs 72 per litre rate in the city.
Chennai saw 24 paise hike in its price to Rs 71.04 per litre on Saturday, compared to previous price of Rs 70.80 per litre.
Therefore, the above mentioned state capital’s diesel prices are at record high.
However, today’s hike is despite Brent crude futures falling 79 cents, or 1%, to settle at $78.51 a barrel on Friday. This commodity has broken through $80 a barrel for the first time since November 2014, and investors anticipate more gains due to supply concerns, at least in the short term.
Brent crude oil has surged by nearly 17.5% since start of 2018.
It needs to be noted that, the OMCs have started hiking petrol prices from Monday onward, for the first time since April 24 after the conclusion of the Karnataka election voting.
Therefore, from May 14 till today, diesel prices have risen by Rs 1.38 per litre each in New Delhi and Rs 1.23 per litre in Kolkata. Whereas, Mumbai and Chennai saw the most hikes - by as much as Rs 1.47 per litre and Rs 1.48 per litre respectively.
Harshad Katkar, Research Analysts at Deutsche Bank said, “Even ahead of the Gujarat elections in December 2017, we had witnessed a similar scenario where the auto-fuel margins only improved post-poll - as retail price increase lagged the international auto-fuel price rise ahead of the elections from INR 0.1/lit to over INR 2/lit. We expect to see a repeat of this scenario post the Karnataka elections and expect the auto-fuel margins to normalise over the next few weeks.”
Petroleum product consumption growth slowed to 4.4% in April 2018 after a strong 7.2% in Mar’18. Consumption growth was 5.3%YoY in FY18 and 8.4% YoY in 4QFY18.
Katkar said, “The robust consumption growth despite higher auto fuel retail price YoY, indicates the improving economic environment. We expect diesel and petroleum product growth to sustain with improving industrial activity.”