The price onslaught on common man continues unabated. Last week, there was mutual backslapping after a record drop in headline consumer inflation in the country, prompting the Reserve Bank of India (RBI) to cut repo rate by 0.25 per cent.
Nonetheless, it is a different story that banks have refused to respond to the RBI’s rate cut by passing the benefit on to customers. They have, on the contrary, started cutting interest rates on savings bank deposits on which a massive number of people, especially senior citizens, in the country depend.
Last week, SBI pared interest on savings bank deposits from 4 per cent to 3.5 per cent. Private lender AXIS Bank Tuesday pruned its savings bank deposit rates by 0.5 per cent at 3.5 per cent.
More banks are likely to follow suit, piling up pain on depositors. Amid the present flare-up in vegetable prices, reduction in interest income has hit the retired and elderly the hardest. This is over and above the price jab that came as a result of the whittling down of subsidy in cooking gas, beginning last week. It had dealt a heavy blow on lakhs of poor and marginal families in the country.
Oil marketing companies (OMCs), which were allowed in June to change petroleum prices on a daily basis, are silently jacking up their rates, slowly but steadily. Escalation in petroleum prices is determined primarily by two factors: The value of rupee reflected by its exchange rate and the international price of crude.
Favourable conditions prevail on both these counts. Indian rupee has run up quite a bit against US dollar over last two weeks sustaining its sub-Rs64 level while international crude price was down 21 cents Wednesday at $51.93 a barrel.
Indian rupee has turned out to be one of the best performing currencies in the world with a gain of well over 6 per cent against the greenbacks this year to date. In fact, the currency hit a two-year high of 63.60 last Wednesday, supported by strong inflows of foreign capital.
Mark Mobius, executive chairman of Templeton Emerging Markets Group at Franklin Templeton Investments, predicts Indian rupee will continue to get stronger and hit Rs60 against the US dollar by the end of this year on the back of rising reserves. Around the beginning of 2017, analysts were bearish on the rupee.
To increase diesel and petrol prices in the face of a fast appreciating rupee and stable international crude prices baffles reason. The government bent backward to the demands of OMCs and retailers by authorising them to change fuel rates daily.
However, it was incumbent on the government to see that the fuel prices reflect the fall in crude prices and appreciation of rupee. As these determinants change every day, there should be a transparent mechanism to calibrate these changes.
Public should be made aware of how fuel prices get influenced. Inasmuch as the petrol and diesel prices change by a few paise, consumers do not realise their rise and fall, unlike in the past.
Earlier, the rate changes were effected every fortnight and were noticeable as the changes ranged from Rs1 to Rs4. By allowing OMCs to effect change every day, they think they can fool people and get away with it.
Petrol price in the state has gone up by over Rs1.10 per litre in a week’s time while the diesel rate has firmed up by nearly Rs1 per litre — all this when both factors that determine fuel rates are favourable and warrant a cut in petroleum prices.
Introduction of the system of daily changes in petrol and diesel rates has been favouring fuel retailers and OMCs at the cost of end-users. A runaway rise in petroleum prices as is being seen now will have a further effect on prices of vegetables and cereals as their transportation cost will shoot up, adding to price jabs on consumers.