India’s state fuel retailers raised petrol and diesel prices on Friday – for the first time since the start of the war with Iran – as they seek to recoup some of the losses incurred from rising global crude prices.
Indian Oil Corporation, Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL) increased fuel prices by ₹3 a liter ($0.03, €0.27), or more than 3%. With this, the price of diesel will be Rs 90.67 per liter ($0.95, €0.81) and the price of petrol will be Rs 97.77 per liter ($1.02, €0.88). Fuel prices in India vary across cities and states due to state-level taxes, transportation costs and dealer commissions.
Global oil prices rose above $120 per barrel during the US–Israeli war with Iran and then fell back to around $100–105.
In April, Indian oil ministry official Sujata Sharma said that Indian retailers lost about ₹100 per liter ($1.04, €0.9) on diesel and about ₹20 per liter ($0.21, €0.18) on petrol due to higher oil prices.
While BPCL confirmed the price hike, HPCL and Indian Oil did not immediately respond to requests for comments.
Indian Prime Minister Narendra Modi is currently on a state visit to the United Arab Emirates. On Friday, the two countries signed an agreement on strategic defense cooperation, petroleum reserves and supply of liquefied petroleum gas.
era of austerity
This is the first time in four years that India’s government retailers have increased petrol prices.
While the Modi government initially assured the public that petrol prices would not be increased, experts warned that a hike would be inevitable if the Middle East crisis continued.
The hike in fuel prices comes after Modi called on Indians to make some sacrifices to save India’s economy from the consequences of the Iran conflict in the Middle East.
Speaking at a rally this week, he urged Indians to cut fuel consumption, work from home, postpone foreign travel, avoid unnecessary imports and delay gold purchases. The message was framed as a patriotic responsibility in a time of global instability.
Modi said, “The West Asia crisis is one of the worst crises of this decade; just as we controlled the Covid-19 pandemic, we will come out of this too.”
Since making this appeal, the Prime Minister has limited his own convoy to just two cars. Meanwhile, the Chief Minister of the national capital announced several supportive measures for 90 days. This includes working from home two days per week for government officials, “no vehicle days” and instructions for ministers to use public transport.
Some states also sent notices to government departments, directing them to restrict travel, avoid physical events and hold meetings online.
India is currently facing an acute shortage of US dollars, which it uses to pay for imports. Oil and gold are India’s biggest imports.
just the beginning?
Higher petrol prices are likely to increase inflation.
Madhavi Arora, chief economist at Emkay Global Financial Services, said the direct impact of this increase would be 15 basis points lower on consumer price inflation.
However, the indirect impact will be larger, he said.
“These padayatras are not enough but can be the beginning of many phased padayatras,” he said.
India’s retail inflation rose to 3.48% in April on the back of higher food prices, government data showed on Tuesday, as risks from rising energy costs linked to the Middle East conflict clouded the outlook.
“India’s petrol demand growth will be impacted, although the price increase is modest, but other fuel conservation steps like working from home will impact demand growth,” said Prashant Vashishtha, vice president and co-head of corporate ratings at ICRA, Moody’s India arm.
Opposition criticized Modi government over the increase
India’s opposition leaders criticized the Modi government for the petrol and diesel price hike and its timing, and accused the Prime Minister of delaying the hike until after the 2026 state assembly elections.
Mallikarjun Kharge, president of the Indian National Congress, India’s largest national opposition party, said, “During elections, the Modi government behaves as if ‘everything is normal,’ and the job of the central government is only to contest elections in the states. Now, as the crisis is increasing, Modi ji has started playing the toy of work from home and fuel conservation.”
Edited by: Dmytro Lyubenko