Govt readies energy, fertiliser stocks as West Asia crisis pushes freight, oil costs higher

NEW DELHI: The government is bracing for higher fuel and fertiliser costs as the West Asia crisis pushes up container freight rates and crude oil prices, the Times of India reported, citing officials.

Container rates to West Asian ports have risen from $800 to $8,000-$10,000, sharply higher than the $1,746 per container recorded a year earlier, according to the report.

"It is already pushing freight rates beyond a point... fresh disruption in West Asia will have an adverse impact for rest of the world too," Federation of Indian Export Organisations director general Ajai Sahay said, adding that buyers had so far managed on existing inventory stocks.

Shipping consultancy Drewry said security risks and attacks on ships continue to affect vessel movements through the Gulf, with only two container ships sailing into the Gulf in the latest tracked week, down from five the previous week, while sailings through the Suez Canal rose slightly.

Crude oil is the biggest concern, with the price for Indian refiners averaging $120 a barrel in October, the highest monthly average in 12 years; petrol averaged $140 a barrel and diesel over $154, pressuring state-run retailers whose pump prices are linked to import costs.

The government has so far shielded retailers through duty cuts and permission to raise prices, but has limited headroom for further fiscal concessions, with fuel and fertiliser subsidies already past last year's level, officials said.

Fertiliser companies took advantage of a recent fall in prices to stock up for the next season, and the fertiliser ministry has some surplus cash from the savings, the report said.

Higher-than-budgeted disinvestment receipts and dividends from state-run financial institutions and the RBI, along with steady tax collections, are expected to keep the fiscal deficit within the 4.3% of GDP target, though a spike in the import bill could widen the trade and current account deficits, and a weaker rupee could make Indian stocks less attractive to foreign funds.