Fuel price hike to push inflation even higher

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New Delhi, June 4: The government decision to hike the fuel price is expected to push inflation even higher in coming weeks, as it has already soared to a record 45-month high to 8.1 per cent for the week ended May 17. According to recent figures released by the Petroleum Ministry, an estimated increase of 10 per cent in the retail selling prices of the four sensitive petroleum products - petrol, diesel, kerosene and LPG--is likely to have an impact of 171 points or 1.71 per cent on the wholesale price index (WPI), which is the most widely used price index in the country.

The government today announced a hike in petrol prices by Rs five a litre or 11 per cent, diesel by Rs 3 a litre or 9.44 per cent and LPG will be dearer by Rs 50 or 17 per cent, with effect from midnight tonight. Currently, the petrol and diesel are sold in Delhi at Rs 45.52 and Rs 31.76 a litre respectively. An LPG cylinder costs Rs 294.75. The hike, probably the biggest in at least this decade, has been prompted as global crude soared to a record high of 135 dollars a barrel recently. However, the PDS kerosene price has been left untouched.

Meanwhile, Petroleum Secretary M S Srinivasan said here that the increase in the retail selling prices of diesel may fuel the inflation by 0.5-0.75 per cent in the coming weeks. Historical trend suggests that a hike of Rs 2 a litre for petrol and Re 1 per litre in case of diesel pushes up the WPI more than a point in subsequent two weeks.


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