With a significant rise in prices of petrol and diesel in many Indian states, commodities such as edible oils, foodgrain, vegetables are seeing some inflation too.
With a significant rise in prices of petrol and diesel in many Indian states, commodities such as edible oils, foodgrain, vegetables are seeing some inflation too. High petrol and diesel prices impact Wholesale Price Index (WPI) and Consumer Price Index (CPI), pushing up commodity prices, and that can be more damaging, Care Ratings said in a report. The impact of fuel price hike is such that it percolates into prices of other goods by way of transport, logistics and freight costs.
“The rising prices of petrol and fuel has spooked the market which sees inflation climbing, that in turn has affected the bond market as the RBI has held on to the yield curve,” read the report. It added that freight rates, which have been fairly stable since March 2016, are now rising with increase in fuel prices. CMIE data shows that the freight index has gone up by 10.5 per cent. This is significant because the increase in freight cost will be embedded in the cost of all goods transported by road.
In line with the increasing freight rates, transported goods such as foodgrains, horticulture, raw materials, oil, milk are also rising. “A part of the inflation that is being witnessed in commodities can be attributed to high transport costs as this gets transmitted to the retail prices,” the report said. This is the reason why the road transport adds to the cost of agro products (mainly vegetables) after they leave the primary mandi to be sold in different regions.
Going forward, it is crucial for both central and state governments to coordinate and cut taxes on fuel, the report highlighted. Apart from this, VAT rates also need to be reduced. However, this has to be done at a rate that ensures there is no compromise in the state’s revenue. Meanwhile, petrol and diesel prices have increased 36 times since May 4 and five times this month. In the national capital, petrol costs Rs 100.56 per litre whereas diesel is being sold at Rs 89.62 per litre.