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Rising Fuel Prices - A Study

After a long and continuing battle with the Pandemic, the affects of the Lockdown and Virus induced constraints, establishments working capitals coming under pressure, job stress for the labour; and other concerns of the economy, the common man was looking forward to some immediate tangible relief in the budget.


Especially in the rising prices of Fuel.


However, while the budget has planned economic recovery through ambitious proposals on the macro level , there is no mention to address the concern of rising fuel prices.


The Finance Minister was almost non-challant, when she expressed her lack of influence on prevailing fuel prices, to address this issue. Now fuel prices in India, especially, have a very far reaching affect on the economy.


In the Rural Pockets, Diesel Prices are possibly the ones that gather more interest. While in the Urban pockets, Petrol Prices matter more. During the Pandemic period in Calendar year 2020, the Rural Economy particularly Agriculture held its own, even during Lockdown.


However, in the Urban sector - the Services and Retail Sector, especially in the Metros and Mini Metros were severally affected.


Possibly, the only sectors that survived in the Urban sector was the Essential Supplies like Medicines, Food and Delivery Sectors of the Aggregators. Huge employment generators and sustainers like Real Estate/ Hospitality/ Infrastructure/ Insurance/ Medium and Small Scale Enterprises in Manufacturing and Retail suffered heavy disturbance and losses. They saw both flight of capital and human resources.

(Although , people are now returning, the establishments, that closed, have not opened at Pre Covid levels.).


Now, if we observe fuel buying behavior in the service sector in Urban India, fuel refueling is usually being done in multiples of Rs.100/-. An average service sector person travels distances of average 100 km everyday and consumes about 1 litre of Petrol every day, on a Two Wheeler. An increase of more than Rs.8/litre in petrol from 1 Oct 2020 to now has meant that in a monthly average of 25 days, his spend would have gone up by Rs.1000/. While the wages have gone down from Rs.3000/- to Rs.10000/- : considering wages plus incentives.


Fuel Price Trend in the past 12 months -


Petrol Price Trend in Bengaluru as sourced from https://www.goodreturns.in/


As shown in the aforementioned table; the Petrol Prices have shot up >Rs.18 per litre in the past 12 months. Do note that the single highest price hike happened between June'20 to July'20 when the country was waking up after the strict lockdown.

While the business parameters are not yet at previous levels, the effort in terms of travel and fuel spend per litre has gone up alarmingly. The constraints in terms of fines for No Parking etc are back to Pre-Covid high levels. (Fine for No parking in Bengaluru is Rs.1,650/two wheelers). With reduction in wages/job losses/lesser incentives, the service sector persons will suffer a deep hole in the pockets.


The continuing fear of the Virus infection has also meant that Public Transport is still fraught with risks; and hence personal vehicles will continue to be the preferred mode of transport for some time to come.


Once Petrol prices cross the threshold of Rs.100/litre, which seems imminent, expect a stumble for the Automobile Sector.


The goose that gives the golden egg, may get too weak to lay the egg!

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