Diesel hits 39-month high
Calcutta: The price of diesel has shot up to a 39-month high following a strong rally in global crude oil prices, erasing the gains that motorists had soaked up after the Narendra Modi government's excise duty cut earlier this year.
The pump price of diesel, which powers trucks and public transport, touched Rs 62.22 per litre in Calcutta, the highest since October 1, 2014. This is expected to nudge inflation upwards.
Before the reduction in excise duty by Rs 2 per litre on both petrol and diesel on October 3, the price of diesel had reached Rs 61.80 a litre in Calcutta.
In a statement issued that day, the Union government had justified the move as an attempt "to cushion the impact of rising international prices of crude petroleum oil and petrol and diesel on the retail sale prices of petrol and diesel as well as to protect the interest of the common man".
The Modi government had raised excise duty nine times between November 2014 and January 2016 to cap the gains from falling crude oil prices and shore up the exchequer.
So far, it has not reduced the duty with the same gusto to alleviate the burden on the common man.
In contrast, the price of petrol, which is mainly used by private cars and accounts for only one-fifth of the country's fuel consumption, has yet to peak.
The Indian basket of crude oil stood at $64.52 a barrel on December 28, 2017, rising over 38 per cent from the lows of June 2017 when the average was $46.56 a barrel. Global prices are forecast to rise in 2018 once the oil-producing countries start cutting the output.
If the Indian rupee had not hardened against the US dollar—it gained nearly 6 per cent year-to-date —the impact of the rising crude oil prices would have been higher as India imports the bulk of its energy needs.
Prime Minister Narendra Modi, who has already started talking of pushing the reform agenda after the BJP's narrow win in the Gujarat elections, may face a stern test when crude oil breaches $75 a barrel and possibly ignites public resentment just when the government's fiscal-deficit goal starts to crater.
On Friday, the controller-general of accounts put out data that showed India's fiscal deficit had touched 112 per cent of the budget estimate for 2017-18, mainly because of low GST collections and higher expenditure.