Fuel price hike to affect the common man, drive prices north

New Delhi, Feb 14 (UNI) The Government today indicated that a hike in retail prices of fuel next year would be ''substantial''.

Speaking to reporters, Petroleum Secretary M S Srinivasan said ''the price revision next year can be much higher and substantial''.

The Rs 2 and Re one per litre increase in price of petrol and diesel, announced today, will hit the common man as it will mean less money for the little luxuries of life in the form of increased spending on buying fuel and the indirect effect of higher commodity prices.

While Petroleum Minister Murli Deora appealed to all to ''co-operate'' with the government, for most the decision evoked dismay as they may have to pay even more for their bread and butter.

Analysts warn that shoppers now face paying significantly more for goods in the next 12 months.

Many have already given the clarion call to those within the farming and food processing industry to work together to keep retail prices down.

However, many feel higher grocery costs were inevitable with farmers having to pay out soaring costs for their animal feed, fertiliser and fuel costs.

The only comfort is the government's decision of leaving retail prices of LPG and Kerosene unchanged.

The increase in fuel prices is also expected to contribute atleast 0.20 per cent to headline inflation and lead inflation to around 5 per cent in the near term.

Despite paramount efforts put in by the government to successfully contain inflation in last few years, its reflections were hardly seen in containment of essential commodities prices for the common man, said an industry chamber Assocham report.

Prices have shot up 82 per cent, 34 per cent, 24 per cent, 22 per cent, 21 per cent, 19 per cent and 18 per cent from January 2003 to January 2008, virtually taking out seven essentials like coffee, pulses, wheat, condiments&spices, fruits and vegetables, eggs, fish and meat and milk out of the aam aadmi's reach.

Reserve Bank of India Governor Y V Reddy has reiterated the warning about the dangers of inflation to the economy.

''Prices of non-administered petroleum products (naphtha, furnace oil, aviation fuel and the like) have increased in the range of 28-37 per cent,'' Mr Reddy said.

For Mr Reddy and the Reserve Bank overall, inflationary pressures have firmed up with implications of a rise in prices of food and fuel.

This would also mean that Reserve Bank of India will refrain from cutting rates in the near term.

Beyond the marginal rate cut by banks in the past few days, the interest on home loans and car loans will remain high.

While this has been a question of trade-off between politics and economics, the prospect of a bigger increase in prices of fuel after April will put the government's effort to minimise and soften any impact of the global rise in oil prices at test.

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