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Impact of petrol and diesel price surge on transport service in India

Impact of petrol and diesel price surge on transport service in India

30 June 2021

Post-COVID in last quarter of 2020 the fuel prices especially petrol and diesel were continuously raised. The oil marketing companies have hiked petrol and diesel price by Rs 10 and Rs 11 per litre respectively in October 2020. The price of petrol touched Rs 90 per litre in some cities, the crude oil price had also variation in the international market and central and state governments also imposed increased taxes on fuel to boost revenue. The surge in the fuel price has led to an increase in the average freight rates across modes of transport which will push up for inflammation.

Big transporters somehow managed to bear the sharp increase in the fuel cost but small players struggled as it adversely impacted their profit collection in the competitive market. In February 2021 we witnessed the 16th revision of the petrol price, All India Transporters Welfare Association (AITWA) claimed that the freight rates across modes increased by 25% which is also a matter of concern.

Usually, big transport service providers work on annual, semi-annual contracts on a fixed charge but the 30 to 35 per cent increase in the diesel price has affected their profitability as they have to transport goods at the same price as per the contract along with increased operating cost. The consignment left with them have to be somehow delivered and they cannot charge more with clients.

The inflammation is high which will impact other industries, directly and indirectly, keeping the uniform price on diesel across the country is the best solution to tackle the problem right now Pradeep Singal, Chairman, AITWA, requests Government.

He also says that the increase in the fuel price has to be limited to once per month so that the transport service companies and dealers can adjust their price precisely and make their business profitable.

Looking at the ground level the surge in the petrol and diesel price indirectly makes miscellaneous items costlier. As most of the consumable and non-consumable products are manufactured at factories and transported to markets, the transportation cost increases and the products get costlier than usual. Even the food industry including vegetable, dairy, poultry products gets costlier.

Reasons for rising fuel price in India:

The change in the international crude oil rates and taxes levied by the central and state governments are the two main reasons for increased fuel price in India. Global crude oil prices have been increasing after the Organisation of the Petroleum Exporting Countries (Opec)-plus decided to restraint the fuel supply.

In late 2020 even though the international crude price was lower the price of petrol and diesel were higher than earlier as very high taxes were levied by the central and state governments. At that time Indian people were one of the highest taxpayers on fuel in the world.

In India, oil marketing companies are also responsible for altering the fuel price and the government has no control over it. The present Modi government blames the previous Congress government for poor planning of reliability on fuel. The BJP government is future-oriented in terms of the power and fuel sector, the government is working hard to reduce India’s import dependency and to focus more on green energy.