With the world crude prices again hitting the roof, it is going to be a hell of a job to keep a check on inflation which was brought down to below 5 per cent. Petrol prices in the Arabian Gulf have gone up from 52 US$ per barrel to 56 US$ per barrel in the past fornight and the prices have shot up to 61 US$ a barrel from 54 US$ per barrel. The State-owned oil marketing companies?Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum?have started putting pressure on Petroleum and Natural Gas Minister, Mani Shankar Aiyer for revision in the retail prices. They want to raise petrol and diesel prices by Rs 4 a litre. But then, the oil price revision has always been a political decision. After the UPA came to power and faced the difficult task of revising the fuel prices to save the oil companies from going down under, it blamed the NDA government for sitting over the decision because of General Elections. Irrespective of the party in office, only a political novice would try and increase fuel prices around elections, knowing well that it could fuel the inflation rate. This was why the NDA government was forced to keep the decision on fuel prices in abeyance. But the UPA government has no elections to face in the immediate future. What stops it from aligning the petroleum retail prices to the international level? Is it the fear in the mind of Finance Minister P. Chidambaram that his favourites, foreign institutional investors, could get offended? Or, maybe, they are waiting for the Budget session of Parliament to break for recess next week for a month. Some theatrics from the Left parties may also be in the offing, before the prices are finally sent soaring. The increase in crude prices is not the only reason for the petrol prices to go up. The Budget has proposed increase in the cess besides hiking the effective excise duty rates on petrol and diesel. Interestingly, this was the Budget which was hailed, at least, initially by the UPA partners and the industry. By now it is fairly clear that the revision in the excise on steel would have quite an adverse impact on a whole lot of manufactured goods, be it passenger cars, motorbikes, refrigerators or even the cost of construction. Major car firms like Maruti Udyog, Hyundai, Ford, General Motors and M & M have all announced their intentions to jack up prices from next month.
These are early indications that Chidambaram'soptimism on inflation will soon be punctured. In fact, even the RBI Governor, Y.V. Reddy may have to again revise his estimates of the original guestimate of over 6 per cent.