Commodity prices, including fuel, in India have increased in the past few weeks as energy prices globally have risen due to supply concerns following Russia’s invasion in Ukraine and demand returning after being hit by the COVID-19 pandemic. Petrol prices in Delhi have jumped by Rs 8.40 in the past two weeks, CNG rates have also gone up by about Rs 6.5 per kg after the past seven hikes.
The Brent crude oil prices hit USD 100 per barrel for the first time since 2014, after Russian President Vladimir Putin approved a special military operation in Ukraine’s Donbass region on February 24. In the following days, the US’ West Texas Intermediate crude futures even skyrocketed to USD 130.50 a barrel, its highest since July 2008, before retreating. Brent also hit a high of USD 139.13, also its highest since July 2008.
Brent crude futures on Monday fell USD 1.01, or 1 per cent, to USD 103.38 a barrel by 2223 GMT. WTI crude futures fell 84 cents, or 0.9 per cent, to USD 98.43 a barrel.
Impact on Household
The increase in global crude oil prices due to the Russia-Ukraine war has impacted the household budget in India by way of recent hikes in petrol and diesel prices, costlier vegetable and power.
Petrol prices in Delhi have jumped by Rs 8.40 in the past two weeks, CNG rates have also gone up by about Rs 6.5 per kg after the past seven hikes. Apart from this, costlier diesel, which has gone up to Rs 95.07 a litre, has pushed up the prices of various commodities due to higher transportation costs.
Recently, lemon prices in Gujarat’s Rajkot rose to Rs 200 per kg. “The price of lemon is touching Rs 200 per kg. It was around Rs 50-60 per kg earlier. This is affecting our ‘kitchen budget’. Don’t know when will the prices go down," news agency ANI quoted a customer at a market as saying.
Apart from this, milk prices have also increased in the past few weeks. Last month, companies like Amul, Parag and Verka raised their milk prices by Rs 2, on costlier input costs. “This price hike is being done due to rise in the cost of energy, packaging, logistics, cattle feeding costs," Jayen Mehta, chief operating officer of Gujarat Cooperative Milk Marketing Federation (GCMMF), a marketer of Amul milk and milk products, has said.
The prices of cumin, coriander and chillies have also seen a jump of 40-60 per cent in the recent days, as per a Krishi Jagran report. Higher prices of global prices have also increased the air travel ticket by about 30 per cent in the past month, as per online travel agencies.
On the electricity prices, rating agency ICRA said the sharp increase in the notified domestic gas prices for H1FY2023 would lead to an increase in the variable cost of generation for the domestic gas-based power generation projects by more than Rs 2 per unit compared to the cost of generation at the earlier notified price.
“Given the cost-plus nature of the PPAs tied-up by the gas-based power projects, the increase is expected to be passed on to the customers, mainly the state distribution utilities," ICRA added. It said the Asian spot LNG prices vis-à-vis oil price are at multi-decadal highs.
On the domestic gas prices, the ratings agency said city gas distribution entities may have to pass on the price increases in a graded manner leading to some lag in full passthrough of costs and accordingly pressure on margins.
How Long Will the Impact Remain?
In a research report, Japanese brokerage Nomura said the RBI is likely to re-evaluate its projection for CPI inflation in the upcoming policy meeting. “However, the RBI is likely to suggest that inflationary pressures are temporary, that inflation will remain below its 6 per cent upper-bound," it said.