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Wednesday,08-December-2021

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Petrol and diesel price rise goes for a pause again

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Petrol

Fuel price rise in the country went for a pause as oil marketing companies (OMCs) kept the pump rates of petrol and diesel unchanged on Saturday after increasing it on the previous day.

Accordingly, the pump prices of petrol and diesel remain at Rs 94.76 and Rs 85.66 per litre respectively in Delhi on Saturday.

In the city of Mumbai, where petrol prices crossed the Rs 100 mark for the first time ever last Saturday, the fuel price remains at new high of Rs 100.98 per litre. Diesel price also continues to be at Rs 92.99 a litre, the highest among metros.

Across the country as well petrol and diesel prices remained static on Saturday but the retail prices varied depending on the level of local taxes in different states.

Mumbai is not the only city to have unique distinction of petrol breaching the Rs 100 pet litre mark. Thane reached the mark few days back while few other cities in Rajasthan (including Jaipur) Madhya Pradesh and Maharashtra, having the highest VAT levels on auto fuels in the country, have already been selling normal petrol for over Rs 100 a litre for past several days.

Ganganagar in Rajasthan has the highest level of petrol prices at Rs 105.80 a litre while diesel prices there as well is closing on the century mark remaining at Rs 98.63 a litre. While Rajasthan in general has high retail prices of fuels due to high VAT rates, Sri Ganganagar, a small city in the state near the India-Pakistan border, has the most expensive auto fuel in the country due to higher freight it had pay to get fuel at stations.

Premium petrol price had already crossed the Rs 100 per litre mark in several parts of the country through increase in the retail rates in the month of January and February.

With Saturday’s price revision pause, fuel prices have now increased on 18 days and remained unchanged on 18 days since May 1. The 18 increases have taken up petrol prices by Rs 4.36 per litre in Delhi. Similarly, diesel has increased by Rs 4.94 per litre in the national capital.

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Reduction in taxes on fuel to ease inflationary pressure: RBI guv

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 Reduction in Central excise as well as state VAT on petrol and diesel is expected to ease domestic inflationary pressure, RBI Governor Shaktikanta Das said on Wednesday.

In a virtual address post the monetary policy meet, the RBI Governor Das said that
headline CPI inflation ticked up in October to 4.5 per cent from 4.3 per cent in September, after falling sharply between June and September.

This uptick, he said mainly reflected a spike in vegetable prices due to unseasonal rains in some parts of the country.

Besides, Das cited hardening of international energy prices that have kept domestic LPG and kerosene prices elevated for nearly three quarters, edging up fuel inflation to 14.3 per cent in October.

“The persistence of high core inflation since June 2020 is an area of policy concern in view of input cost pressures that could rapidly be transmitted to retail inflation as demand strengthens.”

“In this context, the reduction of excise duty and VAT on petrol and diesel will bring about a durable reduction in inflation by way of direct effects as well as indirect effects operating through fuel and transportation costs.”

Furthermore, he said price pressures may persist in the immediate term.

“Vegetable prices are expected to see a seasonal correction with winter arrivals in view of bright prospects for the rabi crop.”

“Supply side interventions by the Government have limited the fallout of continuing high international edible oil prices on domestic prices. Though crude oil prices have seen some correction in the recent period, a durable containment of price pressures would hinge on strong global supply responses to match the pick-up in demand as pandemic restrictions ease.”

However, Das pointed out that cost-push pressures continue to impinge on core inflation, though their pass-through may remain muted due to the slack in the economy.

“Over the rest of the year, inflation prints are likely to be somewhat higher as base effects turn adverse; however, it is expected that headline inflation will peak in Q4:2021-22 and soften thereafter.”

In addition, the RBI retained its CPI-based inflation projection at 5.3 per cent for FY22.

The CPI inflation is expected to ease to 5 per cent in Q1FY23 and stay at 5 per cent in Q2FY23.

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RBI maintains India’s FY22 GDP growth projection at 9.5%

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The Reserve Bank of India (RBI) on Wednesday maintained India’s GDP growth projection for the current financial year to 9.5 per cent on accelerated economic recovery along with pent-up demand.

Accordingly, GDP is expected to grow at 6.6 per cent in Q3, 6 per cent in Q4, 17.2 per cent in Q1FY23 and at 7.8 per cent for Q2FY23.

In a virtual address after the MPC’s bi-monthly meet, RBI Governor Shaktikanta Das said: “Incoming information indicates that consumption demand has been improving, with pent-up demand getting reinforced by the festive season. Rural demand is exhibiting resilience and farm employment is picking up with the robust performance of agriculture and allied activities, supported by a strong start to rabi sowing.”

“Other indicators like railway freight traffic, port cargo, GST receipts, toll collections, petroleum consumption and air passenger traffic have also picked up in October or November.”

Besides, he said that recent reductions in excise duty and state VAT on petrol and diesel should support consumption demand by increasing purchasing power.

Das cited that the government consumption has been picking up from August, providing support to aggregate demand.

Furthermore, he said the Centre’s relaxation of additional market borrowings by states equivalent to 0.5 per cent of gross state domestic product (GSDP) subject to certain capex related milestones and the decision to front-load tax devolution are likely to bolster capital outlays of the states.

He pointed out that the Centre’s focus on ‘capex’ should crowd in private investment, which has remained in a prolonged state of muted activity.

“Overall, the recovery that had been interrupted by the second wave of the pandemic is regaining traction, but it is not yet strong enough to be self-sustaining and durable. This underscores the vital importance of continued policy support.”

“Downside risks to the outlook have risen with the emergence of Omicron and renewed surges of Covid-19 infections in a number of countries.”

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RBI keeps lending rates intact, remains accommodative

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 To support a durable as well as lasting economic recovery amid concerns over the Omicron variant of the coronavirus, the Reserve Bank of India on Wednesday retained its key lending rates along with the growth-oriented accommodative stance during the pan-ultimate monetary policy review of FY22.

The Monetary Policy Committee (MPC) of India’s central bank voted to maintain the repo rate, or short-term lending rate, for commercial banks at 4 per cent.

Repo Rate (RR) is the rate at which the RBI lends money to commercial banks or financial institutions against government securities.

The reverse repo rate was also kept unchanged at 3.35 per cent, and the marginal standing facility (MSF) rate and the ‘Bank Rate’ at 4.25 per cent.

It was widely expected that MPC would hold rates along with the accommodative stance.

In a virtual address after the MPC’s bi-monthly meet, RBI Governor Shaktikanta Das said that economic recovery disrupted by the second wave of the pandemic is gaining traction.

However, this recovery is still not strong enough to be self sustaining and durable, thereby, supportive policy measures such as accommodative stance are required.

Besides, RBI retained India’s FY22 GDP growth projection at 9.5 per cent.

Das pointed out that GDP is expected to grow at 6.6 per cent in Q3, 6 per cent in Q4, 17.2 per cent in Q1FY23 and at 7.8 per cent for Q2FY23.

“Overall, the recovery that had been interrupted by the second wave of the pandemic is regaining traction, but it is not yet strong enough to be self-sustaining and durable. This underscores the vital importance of continued policy support,” Das said.

“Downside risks to the outlook have risen with the emergence of Omicron and renewed surges of Covid-19 infections in a number of countries.”

Furthermore, the CPI-based inflation is projected at 5.3 per cent for FY22.

The CPI inflation is expected to ease to 5 per cent in Q1FY23 and stay at 5 per cent in Q2FY23.

“In the current situation, it is important to keep inflation aligned with the target while focusing on a robust growth recovery,” Das said.

“Simultaneously, the Reserve Bank remains cognisant of the need to ensure that financial conditions are rebalanced in a systematic, calibrated and well-telegraphed manner while preventing build-up of financial stability risks,” the RBI governor added.

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