It is also important to note that wholesale price index (WPI), which basically reflects inflation at production sites, shows a steep rise to an average of 12.6 per cent during the period April 2021 to January 2022. This has been driven by low base as well as rise in prices of inputs particularly of minerals, crude oil and manufactured products.The weakening of the rupee also imported inflation and that also impacted production costs adversely.The big corporates with lots of reserves and savings could contain this rise in input costs for the time being while small and medium enterprises are facing a tight situation caught between rising production costs and sluggish demand. In fact, many manufacturers have already indicated upward revision of prices in the near future.Rise in crude oil prices has a direct bearing on consumer expenditure as transport costs as well as production costs will rise due to higher fuel price. The Economic Survey estimated that oil prices will be 70 to 75 US dollar per barrel throughout 2022-23. But that has turned out to be wishful thinking.The retail price of petrol and diesel has been capped by the oil companies for the past two months as the Central government did not want any increase in prices till the elections for assemblies in five states are over.Come March 10, when the results will be out, one can expect steep increases in the prices of petrol, diesel and gas. Such escalation of prices of petroleum products will lead to sharp inflationary surge.In such a scenario, instead of using this as an opportunity to realise higher revenue through indirect tax in the form of excise duty on increased oil prices, the Central government should immediately cut down central excise duty so that the shock of higher oil prices added with excise duties once again does not hurt the average consumer and dampen the slowly recovering demand in the economy.In November 2021, the Centre reduced excise duties by Rs 10 per litre of diesel and Rs 5 for a litre of petrol. After this cut, the total excise duty remained Rs 27.8 for a litre of petrol and Rs 21.8 for diesel.
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