WITH two fuel price hikes in less than a week, ending a near four-year-freeze, the impact of the Iran War is being increasingly felt here. With these hikes, oil marketing companies hope to offset part of their huge losses over the past two months. Crude prices rose steadily since February 28 – the start of the war – but retail fuel rates remained frozen at a two-year-old level due to governmental insistence in favour of consumers. Before the 2024 parliament polls, fuel prices had been reduced by Rs 2. Before the recent assembly polls, excise duty on fuels saw a slight reduction. Both actions had political motives. Through all this, however, consumers – particularly motorists—had heaved a sigh of relief. Inflationary trends were under control. Now they’re in for a shock. Fears are that the trend of price increases will continue through repeated and swift jolts.
Notably, Prime Minister Narendra Modi conditioned public minds a week ago through a statement calling for reduced travel, promoting a work-from-home culture, etc. He knew what was building up. This is a unique situation caused by an external tumult and every nation, including the US, is facing the brunt of the war in multiple ways. The aviation sector itself faced some odds. Yet, a rise in fuel prices affects people in many different ways. Indians increasingly own vehicles for daily travel. Paying a bit more for fuel hurts them every time they reach a fuel dispensing station. Worse, an increase in fuel prices is bound to raise the costs of every commodity as transportation costs spike. Essential items for daily use would see a price hike. Cumulatively, this will add to the burden of the common man. This could cause social unrest.
Prime Minister Narendra Modi, through his 12 years at the helm, was singularly lucky to have seen the crude prices falling and remaining somewhat steady. After he took charge, crude prices suddenly fell from over $100 to around $60. This scenario continued for years and prices were around $70 when the Iran war started. Thereafter it reversed to more than the 2014 level. In fact, there should have been sharp reductions in fuel prices during the three Modi terms. But the government opted to retain the price levels, apparently to earn more and add weight to the exchequer. The oil firms also benefited greatly; the people did not, though. Now, it would be advisable for the government to intervene and keep the prices steady. The blockade on the Strait of Hormuz is not going to last for long. This is a brief phase, during which time the government is duty-bound to help the people by ploughing back the huge income it earned from this sector over the last 10 years. Oil marketing companies claim to incur a daily loss of Rs 750 crore, which is high. But it is also important for the government to avert a situation where raising transportation costs leads to price increases, and in turn inflation which would hurt the common man the most.
