With the Jasmine revolution entering its third phase in Libya, Bahrain and Yemen, concerns on global inflation and impact on investments have started weighing on Indian markets.
Since January 25, when the crisis in Egypt started building up, Brent crude oil has increased over 12 per cent from $94.59 a barrel to around $106. During the same period, the Indian basket, which represents a mix of Oman, Dubai and Brent crude rose 9.48 per cent to $101.67 per barrel, the highest in the current financial year.
The underrecovery – the revenue loss for public sector oil marketing companies (OMCs) – today stands at Rs 10.74 a litre on diesel, Rs 20.56 per litre on kerosene and Rs 356 on LPG cylinder.
Fearing political repercussions, the government has already ruled out any increase in diesel prices. In the case of petrol, decontrolled with effect from June 26, 2010, the companies are incurring a loss of over Rs 2 a litre as they have not been able to pass on the entire price rise.
Stating the current spurt in oil prices was not due to a demand-supply mismatch, petroleum minister S Jaipal Reddy asked the Organisation of Petroleum Exporting Countries (OPEC) to address the issue by increasing output. In an interview to Reuters in Riyadh, Reddy said: “It (oil price rise) is caused by political factors, unrest in the Middle East. I think OPEC should react to address the fears of consumers. They must raise output to moderate the rise of oil price.”
Experts point to the sequential nature of the political crisis that started in Tunisia and say things could have turned more worrisome if the upheaval in the entire region happened together.
“Oil prices started rising when the crisis in Egypt erupted but things started settling. The political developments in the region are happening, like a domino chain, so the impact is not much,” said Rajiv Kumar, director general, Ficci. The uncertain economic situation and worries about the corporate investment climate have started showing on the market, he added.
Kumar said the shift of capital towards commodities like gold and high commodity prices could further fuel inflationary pressures on the domestic economy. The oil subsidy bill is expected to cross Rs 76,000 crore in 2010-11.
There are also concerns on the safety of Indian citizens and companies in Libya, Bahrain and Yemen. Overseas Indian Affairs Minister Vayalar Ravi told reporters: “We are constantly in touch with the Indian ambassador posted at Tripoli. Whenever she asks us to react, we will start evacuating our people.” There are around 18,000 Indians working in Libya and about 600,000 in Bahrain, another Arab nation where popular protests have begun against the kingdom.
Ravi had a discussion with the Principal Secretary at the Prime Minister’s Office T K A Nair on Sunday, followed by a detailed discussion with Foreign Secretary Nirupama Rao. According to Ravi: “To tackle any emergency situation, we would require a big vessel to deport Indians from Libya. I have already spoken to Defence Minister A K Antony for necessary arrangements, as Libya has been declared as a no-fly zone by the local authorities.”
