Fuel prices in India have increased 14 times in the last two weeks, with increases occurring virtually daily since March 23, following a four-month period without an increase. A liter (about a quart) of petrol costs 105.41 Indian rupees (€1.28, $1.39) in Delhi at the moment. Diesel is available at a price of 96.67 rupees a liter.
Petrol was priced at 120.51 rupees per liter in Mumbai, India’s financial center, while diesel was priced at 104.7 rupees per liter. The retail price of gasoline is composed of three components: the base price, which is determined by the price of international oil, a central excise charge, and state taxes.
The sharp increase in the price of diesel and gasoline has resulted in a cascade effect, resulting in an increase in the cost of living. Foodstuffs such as vegetables have also been impacted by the huge increase in transportation costs.
“Next week, auto-rickshaw, cab, and taxi drivers in Delhi will embark on an indefinite strike unless the government provides fuel subsidies or increases fares,” union leader Ravi Rathore told DW.
Essential food items have grown in price, significantly impacting household budgets.
“Almost everything has increased in price. The price of meat, particularly chicken, eggs, and milk, has been steadily increasing “Sarasvati Sarkar, an Indian capital inhabitant, said DW.
According to industry observers, Russia’s invasion of Ukraine had an effect. The battle has had a significant impact on the price of Brent crude oil, which has increased from $81.05 per barrel in November to $108.9 per barrel today. According to some experts, these increases are likely to continue.
The majority of crude oil originates in the Middle East and the United States.
“While Russia is offering its Urals-grade oil in exchange for further supplies, this represents less than 1% of India’s total imports. India imports 85 percent of its crude oil requirements, with Iraq, Saudi Arabia, and “M K Venu, an economic specialist, said DW.
Domestic gasoline prices are directly related to global oil prices, but have remained unchanged till recently.
“Even if India maintains its current rate of oil imports from Russia, it will have no effect. Even doubling or tripling the amount will make little effect “Venu remarked.
India and Russia recently explored the idea of New Delhi paying for discounted oil purchases with rupee-to-ruble transactions, as Russian banks have been blocked off from the dollar and euro payment networks.
India has purchased at least 13 million barrels of Russian oil and arranged for supplies of Russian crude oil over the next three to four months since the invasion began on February 24.
“Additional Russian crude oil purchases will have no effect on India’s import bill. To bring gas costs under control, the government may consider reducing some taxes or developing some particular strategies, since it is critical to do so, or else inflation will soar “According to Ravi Datar, an energy specialist.
The ruling Bharatiya Janata Party (BJP) blamed the increase in fuel costs on the impact from the Russia-Ukraine crisis, oil bonds issued by the then-Congress-led United Progressive Alliance (UPA) administration, and state-level taxation. The UPA was in power from 2004 to 2014, when Narendra Modi’s BJP won the election.
“The primary reason is the increase in crude oil prices on the international market. Because the government does not control fuel costs, it plays no part in their rising “Samik Bhattacharya, the BJP’s spokeswoman, told DW.
Trends in inflation
The administration stated that the price rises were small in comparison to the surge in fuel and diesel prices in other nations following the invasion. Additionally, it mentioned recent attacks on Saudi Arabia’s oil and gas infrastructure as a reason for the increase.
This week, Petroleum Minister Hardeep Singh Puri informed Parliament that fuel costs have increased by more than 50% in countries such as the United States, the United Kingdom, Canada, Germany, and Sri Lanka.
“When the military assault began on February 24, worldwide oil prices surged to $92, then to $124, and finally to $130. Is the United States the only country impacted by this?” Puri added that India’s fuel price increase was actually a tenth of the rate in other countries.
It has raised the problem of high crude oil prices with the Organization of the Petroleum Exporting Countries (OPEC), requesting that they increase crude oil production.
Economists fear that if the Reserve Bank of India (RBI) does not take enough measures to anchor inflationary expectations, the oil shock will result in sustained inflation.
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Foreign oil prices have never fluctuated in lockstep with Indian fuel costs, as the formula used to set Indian fuel prices includes a benchmark rate based on international prices, domestic taxes, and other components such as freight.
“Global uncertainty caused by Western sanctions on Russia and disruptions in the oil supply chain can exacerbate the fuel price crisis in the long run,” Lekha Chakraborty of the National Institute of Public Finance and Policy told DW.
“A deliberate policy package is necessary by the government of India to rein in fuel inflation since the RBI will be unable to do so and the credibility of inflation targeting will be jeopardized,” she added.
Already, the country’s annual inflation rate has surged for the fifth consecutive month to over 6% in February, the highest level since June 2021 and well beyond market expectations of 5.93 percent.