Fuel prices were hiked by state-run oil marketing companies (OMCs) after a gap of two days as global crude oil rates keep climbing. Petrol and diesel prices were hiked by 35 paise each on Wednesday.

Petrol is retailing at over Rs 106 per litre in Delhi after the fresh hike, while it has crossed Rs 112 per litre in Mumbai. It costs nearly Rs 107 per litre in Kolkata and above Rs 103 per litre in Chennai. There are hardly any major cities left where petrol costs less than Rs 100 per litre.

Diesel prices have also witnessed a similar rise over the past few days. It costs nearly Rs 95 per litre in the national capital and almost Rs 103 per litre in Mumbai. Diesel is retailing at Rs 98 per litre in Kolkata and above Rs 99 per litre in Chennai.

The sharp rise in fuel prices comes at a time when global crude oil prices are rising rapidly due to higher demand and lower supply. An earlier report indicated that benchmark Brent crude oil could cross $90 per barrel by December, leading to a further rise in domestic fuel prices.

It may be noted that fuel prices have never been so high in the country and experts are worried that it could seriously impact economic recovery. This is because the price of petrol and diesel directly impacts the cost of many other essential and non-essential goods.

A fuel-driven inflation hike could, therefore, destabilise the economic recovery as prices of goods — from daily grocery to luxury products — will keep rising and consumer demand will fall as a result.

Higher inflation could also threaten the Reserve Bank of India’s plan to maintain a low interest rate regime that has helped the economy recover substantially after two waves of the pandemic pummelled growth.

Despite the risks, the government has defended collecting higher taxes on fuel. Taxes levied on fuel in India are among the highest in the world.

Meanwhile, the plan to include petroleum products under the ambit of GST, which is expected to significantly reduce petrol and diesel prices, is far from reaching a conclusion. Therefore, the two major options to reduce fuel prices are effectively out of reach at the moment.

This is not good news for citizens who may have to pay higher for petrol and diesel in the near future as OMCs will be forced to hike rates if global crude oil prices gain momentum.

Petrol and Diesel rates in major Indian cities: