Industries at cynical best over oil price hike

The hike in oil and cooking gas prices would have an inflationary impact on the economy and would have a spiraling effect on the prices of commodities, feel Gujarat's industries.

The government had hiked the price of petrol by Rs 2.19 per litre, diesel by Rs 2.12 a litre and cooking gas by Rs 20.

Over 27 per cent of Gujarat's industries are based on petroleum products as petroleum products supplement energy requirements due to inadequate power generation and irregular coal supply. The price hike will adversely affect the growth of industries in Gujarat, making them uncompetitive in the domestic as well as foreign markets, they feel.

"The price hike coming just before the festive season would dampen the spirit of the people looking forward to Diwali. The LPG price hike will only increase the frustration and resentment in the middle and lower income segment of the country. The hike will also impact the freight rates, which will go up and lead to indirect cost push inflation in the economy. A hike in the petroleum prices will not only impact the common man, but also the negatively affect companies in the automobile sector," said Chinubhai R Shah, president, Gujarat Chamber of Commerce and Industry (GCCI).

The prices of petroleum products have hit the roof in the past 10 years, with the price of petrol doubling and diesel increasing three times using 1995 as base year.

LPG prices were Rs 250 per cylinder in 2000, which have risen to Rs 315.42, registering a growth of 26 per cent hike in the past five years. The current hike has been the steepest in recent times.

Even the recent mid-term review of the credit policy signaled the worry of the central bank in reining the inflation.

RBI had hiked its inflation estimate from 6.5 per cent to seven per cent in the policy announcement. The immediate effect of the hike will lead to a snowballing effect on the prices of goods and services in the country.

It is highly essential that the Central government reconsider its strategy of imposing such unwarranted price hikes time and again as the domestic prices of the petroleum products are already high, an industrialist said.

The economy as a whole should become more energy efficient, switching modes of transport and fuels, investing in new technology and tapping into alternative energy sources including natural gas, hydel and non-conventional ones.

Such progressive measures are the only way out to soften the pinch of rising prices, feel industries.