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Increased fuel prices shouldn’t slow down growth in any manner: Assocham president

“Across the industry as a whole, the cost structure has gone up and freight rates across several sectors have moved up because of the increase in fuel prices,” said Assocham president Vineet Agarwal.

Written by Karunjit Singh | New Delhi |
February 1, 2021 1:01:39 am
fuel prices, petrol price increase, logistics sector, input tax credit, ITC, economic growth, Indian eonomy, economy news, Indian express newsVineet Agarwal, managing director of Transport Corporation of India Ltd and president of Assocham.

The government should allow the logistics sector to claim input tax credit (ITC) on fuel purchases to help reduce costs amid rising freight rates due to increasing fuel prices, said Vineet Agarwal, managing director of Transport Corporation of India Ltd (TCIL) and president of industry body Assocham, told The Indian Express.

Aggarwal noted that freight rates across sectors had moved up due to higher fuel prices. The prices of auto fuels are at record highs across the country on the back of increasing crude oil prices and elevated central and state levies. The prices of both petrol and diesel have risen by over Rs 5 per litre since November 20, 2020, when oil marketing companies (OMCs) resumed daily price revisions after a near two-month period of static prices.

“Across the industry as a whole, the cost structure has gone up and freight rates across several sectors have moved up because of the increase in fuel prices,” said Agarwal, noting that Assocham had called for rationalisation in Goods and Services Tax (GST) and that allowing the sector to avail ITC on fuels and lubricants would help reduce overall costs.

Petrol, diesel and natural gas are currently outside the ambit of the GST. The Centre hiked the excise duty on petrol to Rs 32.98 per litre from Rs 19.98 per litre at the beginning of 2020, and that on diesel to Rs 31.83 per litre from Rs 15.83 during the same period to boost revenues as economic activity fell due to the pandemic.

“It is a bit of a concern that the increased fuel prices should not lead to any kind of inflation or essentially slow down growth in any manner, though right now it doesn’t seem like it,” said Agarwal.

TCIL, among the largest multimodal logistics companies in India, has made investments in storage facilities and in augmenting its fleet for the distribution of Covid-19 vaccines, he said.

Agarwal added that India’s large vaccination programs to administer polio and BCG vaccines had provided the country with key experience which would help in the successful delivery of the Covid-19 vaccination. He did, however, note that there was still a need to build quality infrastructure at the district level and to ensure that logistics allow for last-mile delivery of Covid vaccines to happen at the right temperature. Both the Covid-19 vaccines being administered in India need to be stored at a temperature between 2-8 degrees celsius.

Agarwal said the logistics industry has recently had excess capacity due to lower demand and the industry was adding capacity to fleets as required for delivery of the Covid vaccine.

He noted that once the vaccine becomes available to the private sector, smaller trucks and even motorbikes with cold storage boxed could play a major role in last-mile delivery of the vaccine.

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