Petrol, diesel price hike likely soon? RBI boss' warning after PM Modi's appeal to save fuel

Reserve Bank of India (RBI) Governor Sanjay Malhotra hinted at a likely increase in petrol and diesel prices if the West Asia conflict involving the US and Israel on one side and Iran on the other continues to rage. 

He added that the central bank will consider data for further action and will look through the increase in oil prices if the shock from the conflict becomes deep-seated. 

Malhotra's warning comes after Prime Minister Narendra Modi appealed to the nation to cut down on petrol and diesel consumption and avoid purchasing gold for one year to preserve forex reserves. 

"If this is to continue for a longer period of time, it is just a matter of time before the government will pass on some of the price increases," the RBI Governor said at a Swiss National Bank-International Monetary Fund conference in Switzerland. 

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He, however, added that excise duties were reduced while OMCs continued to absorb the rise in global crude oil prices as the war drags on. 

Meanwhile, Union Minister for Petroleum and Natural Gas Hardeep Singh Puri said that public oil marketing companies wouldn't be able to sustain losses of ₹1,000 crore per day.

Without commenting on whether there'll be a price hike, Puri said at the CII's annual business summit, "They're taking a loss to insulate the consumer. But at some stage, government would have to take a call." 

"How long will the oil companies be able to take it (losses)? Frankly, that's something that worries me," Puri added. He further mentioned that OMCs were under huge financial strain, with under-recoveries of ₹2 lakh crore and losses of ₹1 lakh crore in the April-June quarter. 

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Dismissing reports that the fuel price hike was postponed due to the recently-concluded assembly elections, he said that several polls have been conducted since 2022, when the petrol and diesel rates were last hiked. 

 "It's not my case that prices... not go up.  I'm saying the two are unrelated," he said, adding that India was the only country to keep fuel prices unchanged for the past 4 years. 

At present, petrol and diesel prices in India are ₹94.74 per litre and ₹87.81 per litre, respectively. Petrol and diesel rates continue to remain constant despite global oil prices being volatile. On Thursday morning, Brent crude prices were trading over $106 per barrel, whereas US West Texas Intermediate (WTI) crude oil is trading at $101.72 per barrel. 

Allaying fear of shortages, Puri said that there were no issues related to supply despite disruptions in energy flows. The country has 60 days of crude and LNG inventories and 45 days of LPG stocks. He added that the need to increase reserves, stating that one of the OMCs was acquiring 400-500 acres for additional storage.