(Bloomberg) -- High retail fuel prices are prompting India to seek alternatives to curb crude imports and relieve the pressure on the rupee, according to Road Transport Minister Nitin Gadkari, a key member of Prime Minister Narendra Modi’s government.
Fuel “rates are very high and it is a situation where definitely the people are facing a problem,” Gadkari said at the Bloomberg India Economic Forum on Tuesday. “We are going for bio-fuel, electric vehicles, ethanol, methanol and bio-diesel.”
Rising prices of Brent crude, the benchmark for half the world’s oil, has inflated India’s crude import bill and contributed to the widening in the nation’s current-account deficit, a key vulnerability for the economy and one of the reasons why the rupee has been among the worst-hit in Asia amid an emerging-market rout this year.
Gadkari declined to comment on the government’s plan to provide relief on fuel prices, saying it’s for the finance minister to decide on appropriate steps.
Modi’s government has so far resisted the temptation of cutting retail fuel prices by reducing taxes to avoid forgoing revenues. But with general election less than eight months away, the Modi administration risks inviting the ire of the people.
Rising fuel costs may fan consumer prices and probably force the inflation-targeting central bank to add to its two interest-rate increases this year. While gains in consumer prices eased below 4 percent in July, India Ratings and Research Pvt., the local unit of Fitch Ratings Ltd., sees inflation quickening to 4.6 percent in the absence of the government cutting taxes on gasoline and diesel.
“Because of crude, we are facing a problem, dollar-rupee fluctuation is there, our imports are high,” Gadkari said. “We have to control the imports and we have to think about import substitute economy,” he said, suggesting a push to more alternatives in order to reduce reliance on petroleum products.
©2018 Bloomberg L.P.
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