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Commercial vehicle operators to feel heat of rising fuel prices

Author: IANS/Monday, July 9, 2018/Categories: Auto & Ancillary

Commercial vehicle operators to feel heat of rising fuel prices

New Delhi - Fitch Ratings has 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 ratings agency said in a statement. 

According to the firm, diesel prices in Delhi averaged Rs 67.4 per litre in June, which was 26% higher than a year earlier and up by more than 50% on 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% 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% 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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