India has raised petrol and diesel prices for the first time in 4 years by ₹3 per litre. According to retailers in Delhi on Friday, the government is seeking to overcome some losses it faced due to higher global crude oil prices. Global oil prices rose by more than $120 a barrel following the closure and severe disruption of the Strait of Hormuz by the war, which started with the US-Israeli attack on Iran before pulling back, to around $100 to $105.
India is the last major economy to raise retail oil prices. Diesel in Delhi will not cost ₹90.57 per litre, and petrol will cost ₹97.77 per litre. The direct impact of the fuel price hike would be muted at about 15 basis points on consumer price inflation, although the indirect impact will be larger, said Madhavi Arora, chief economist at Mumbai-based Emkay Financial Services.
Indian Oil Corp, Hindustan Petroleum Corp, and Bharat Petroleum Corp, which are state-run companies controlling more than 90% of India’s 103,000 fuel stations, tend to fix diesel and petrol prices in tandem. On the last Sunday PM, Narendra Modi urged a spate to opt for work-from-home practices and limits on foreign travel/imports because the rising global oil prices are affecting the country’s foreign exchange reserves.
Analysts and opposition parties said state retailers had delayed raising prices during key state elections. The polls ended this month, with Modi’s BJP winning two of four states and expanding its influence. In April, an oil ministry official, Sujata Sharma, said retailers lose about ₹100 per litre on diesel and about ₹20 on petrol. In late March, Russia-backed Indian private refiner Nayara Energy raised pump prices to mitigate some of its revenue losses from retail sales.
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After these conflicts, PM Modi is going on a 5-nation tour from May 15-20. He will visit the UAE on Friday, where he is likely to discuss long-term energy supply deals and seek support to expand his country’s strategic oil reserves, as the world’s third-largest energy importer seeks to secure supplies badly disrupted by the U.S.-Israeli war on Iran. The UAE’s recent exit from OPEC is expected to boost its output and help countries like India.
