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Informist, Friday, May 15, 2026

 

NEW DELHI – Further depreciation of the rupee can exhaust all gains for oil companies and the government from the hike in fuel prices as it would increase the dollar-denominated price of crude oil imports, State Bank of India said in a report. As such, the rupee cannot act as a shock absorber any further, prompting the need for a comprehensive policy on balance of payments, it said.

"Our calculations show that, even an additional depreciation of INR 2 in the rupee (from FY27 current average at Rs 94 stays put) raises the effective crude oil price pushing the landed import cost which fully offsets the gains from the current fuel price hike," SBI's economic research department said. "Thus, the rupee has already approached a critical depreciation threshold, beyond which further currency weakness could substantially erode the intended benefits of domestic fuel price revisions."

 

Oil marketing companies Friday raised the retail prices of petrol and diesel by INR 3 per litre to reduce the losses incurred from higher crude oil price. According to the government, the oil marketing companies are incurring losses of INR 10 billion per day, amounting to around INR 3.6 trillion a year. The increase in pump prices by INR 3 per litre is likely to provide relief of INR 527 billion in the companies' under-recoveries, which is 15% of the expected total loss in FY27, SBI said. 

 

The fuel price hike is likely to push CPI inflation higher by around 15-20 basis points in May and June, according to the report. SBI now sees inflation averaging at 4.7% in the current financial year, higher than the previous forecast of 4.5%. CPI inflation was at a 13-month high of 3.48% in April.

 

"There is no direct impact of this hike on the fiscal situation," SBI said. "The measure is not likely to have much impact on oil consumption as historical data shows that hike in petrol and diesel price has been followed by decline in consumption immediately after the hike, only to recover thereafter with no decline visible in the annual consumption levels."  End

 

Reported by Shubham Rana

Edited by Rajeev Pai

 

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