The 'deceit' in hiking food prices

Murad Ali Baig, auto expert demonstrates why the rise in fuel prices should not be used by Transporters, Industrialists, bus and taxi companies to demand huge fare increases. If at all they do, that's them exploiting the situation for personal gains.

Consider Murad's calculations. He states, 'Elementary arithmetic will however show that the cost of transport in the cost of most goods averages just 5% and the cost of fuel is usually about 35% of this cost. India’s four million trucks and one million buses have to additionally pay large finance costs, depreciation, staff salaries, tyres, repairs, taxes, bribes, etc. So if the cost of diesel is just 35% of 5%. it is barely 1.4% of the cost of most of the goods that one buys.

Therefore, the recent 8.5% increase in the price of diesel should only have an impact of about 8.5% on this 1.4% or a miniscule 0.12%. It will vary a little and be even less on high value goods that are transported over long distances and a bit more on milk and vegetables that are transported over short distances.

The impact of diesel costs will however affect passenger fares on taxis and buses more seriously, especially when fuel accounts for about 35% of transport costs. But an 8.5% price hike on this 35% should result in a small 2.8% increase in passenger fares. Bus and taxi fares should therefore be up by about 3% and not by the huge amounts that are being demanded.'

Consumers gearing up to face price increases in almost all categories of products and services should know the truth. That, the 'hikes' they now would almost certainly be forced to bear, must be minimal, as the real impact in terms of increased cost of operations for manufacturers and retailers is minimal, and for the transporters, a little more than minimal.


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