Home BUSINESS Rising Fuel Prices Might Impact Commercial Vehicle Operators: Fitch Ratings

Rising Fuel Prices Might Impact Commercial Vehicle Operators: Fitch Ratings

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New Delhi: Fitch Ratings on Friday said that rising fuel prices could strain India’s commercial vehicle operators and lead to a rise in auto-loan delinquencies. “That said, the upbeat economic outlook suggests operators may find it easier to pass increased costs on to customers than during previous fuel-price spikes,” the rating agency said in a statement.

According to the firm, diesel prices in Delhi averaged Rs 67.4 per litre in June, which was 26 per cent higher than a year earlier and up by more than 50 per cent in January 2016.  “Upward pressure has stemmed from the recovery in global oil prices and depreciation in the Indian rupee, which has fallen by almost 7 per cent against the US dollar since the start of the year,” the statement said.

“Our baseline assumption is that global oil prices will remain high over the rest of 2018, while further rupee depreciation is a risk amid US monetary tightening. India is also facing US pressure to reduce its oil imports from Iran, which could further stoke Indian fuel prices.”

As per Fitch Ratings’ statement, freight rates have so far not kept pace with fuel-price increases, rising by less than 15 per cent since January 2016.  “This is causing stress for commercial-vehicle operators, for whom fuel accounts for a significant proportion of overall costs,” the statement said.

“Commercial vehicle loans make up almost all of the pools in our Indian auto asset-back-security (ABS) portfolios. Most borrowers in these pools are small operators that depend directly on their vehicles for income, and some could find it difficult to make repayments if their margins continue to be squeezed.”

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