India may need higher fuel price transmission if crude stays elevated: KPMG's Anish De
New Delhi, May 23
With global crude oil prices rising from around USD 65-70 per barrel to over USD 110, an increase of nearly 70 per cent, concerns are growing globally over the impact on inflation, fuel prices and government finances.
Against this backdrop, ANI spoke to Anish De, Global Head of Energy & Natural Resources at KPMG, on how India is managing the sharp rise in crude prices and its impact on consumers and the economy.
"There have been increases, but very small increases in comparison with the need. Retail prices of petrol and diesel have gone up by about 5 per cent, and that is a big difference," Anish told ANI.
On the economic impact, he noted that while diesel prices may cause some effect, the immediate concern is the fiscal deficit, which could trigger inflation if not addressed.
"The problem is that input prices have gone up by about 70 per cent due to global trends. While we can control the sale prices of petrol and diesel, other industrial fuels are less tightly regulated." He also highlighted that ongoing geopolitical tensions, including the war in the Gulf region for the past 12 weeks, have contributed to increased crude and fertilizer costs.
Regarding policy measures, Anish emphasised the importance of balancing price control and fiscal prudence.
"Price transmission is essential to signal demand reduction and ensure consumers and industries are protected," he said.
On renewable energy, he stated, "Renewable energy has a big advantage because it does not have the import price volatility like crude. Last year alone, India added more than 50 gigawatts of renewable capacity."
He also highlighted the role of biofuels, particularly ethanol for petrol, while noting that biodiesel substitution for diesel requires further development. "Increasing renewable energy production rapidly will reduce the crude import bill and enhance energy security," he added.
He also addressed the role of Artificial Intelligence in the sector.
"AI can improve productivity, optimize renewable energy production, enhance fuel efficiency, and forecast consumption trends. However, effective price signaling remains crucial before AI can have a major impact on managing energy demand and anticipating oil shocks," Anish De stated.
He concluded by stating that while India remains heavily dependent on imported oil and gas, scaling up renewable energy over the next decade could gradually reduce this dependence, mitigating the impact of global oil price shocks.
— ANI
Reader Comments
Good to see KPMG acknowledging the fiscal deficit concern. But honestly, when crude was below $70, did we see any price reduction? 🤔 Now they want us to pay more because of "global trends"? Maybe the government should explain how the windfall gains tax on oil companies is being used. Renewable energy target of 50GW is impressive though - hopefully we'll reduce that import bill soon. Green energy is the way forward! 🌱
Interesting perspective from KPMG. I'm from the US but working in Mumbai now, and I've noticed the difference. Back home, gas prices fluctuate daily with crude oil. Here, they seem to be more controlled but the impact on inflation is similar. The AI part is fascinating - using machine learning to forecast energy demand could be a game changer for India's grid management. I hope the renewable push accelerates!
Anish De's point about price transmission to reduce demand is logical, but in India we have to think about the poor auto-rickshaw drivers, farmers, and small businesses. Already inflation is squeezing middle class families. 😞 Petrol price transmission just means higher costs for everything - from food to transport. And biodiesel substitution for diesel is still a pipe dream. We need more practical solutions, not just theoretical economics.
Very balanced analysis from KPMG. The Gulf tensions are real and affecting global supply chains. I appreciate them mentioning ethanol blending - India's ethanol program from sugarcane is actually working well. But the real elephant in the room is our import dependence. We have 70% import reliance on crude! The renewable energy push of 50GW is great but electricity generation is only half the story. We need electric vehicles and better public transport to reduce petrol demand. 🚗⚡
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