Indian state-run fuel retailers raised petrol and diesel prices on Friday for the first time in four years, as they seek to recover losses from rising global crude prices. Analysts warn this could be the first of many hikes.
Indian Oil Corporation, Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL) increased fuel prices by 3 rupees per litre ($0.03, €0.27), or more than 3%. Diesel now costs 90.67 rupees per litre ($0.95, €0.81) and petrol 97.77 rupees ($1.02, €0.88). Prices vary across cities and states due to local taxes, transport costs, and dealer commissions.
Global oil prices spiked to over $120 a barrel amid the US-Israel war with Iran before pulling back to about $100-$105. In April, Indian oil ministry official Sujata Sharma said higher oil prices caused Indian retailers to lose about 100 rupees per litre ($1.04, €0.9) on diesel and about 20 rupees ($0.21, €0.18) on petrol.
Prime Minister Narendra Modi is on a state visit to the United Arab Emirates. On Friday, the two nations signed a pact on strategic defence cooperation, petroleum reserves, and supply of liquefied petroleum gas.
Modi's government had initially assured the public that petrol prices would not be increased, but experts warned hikes would be inevitable if the Middle East crisis persisted. The price rise comes days after Modi called on Indians to make sacrifices to shield the economy from the fallout of the Iran conflict. Speaking at a rally, he urged Indians to cut fuel consumption, work from home, postpone foreign travel, avoid unnecessary imports, and delay gold purchases, framing it as a patriotic duty.
Since the appeal, Modi slashed his own convoy to just two cars. The national capital's chief minister announced supporting measures for 90 days, including two days of work from home per week for government officials, a "No Vehicle Day," and directions for ministers to use public transport. Some states also sent notices to government departments to restrict travel and hold meetings online.
India faces a significant shortage of US dollars used to pay for imports. Oil and gold are India's largest imports. Higher petrol prices will likely lead to rising inflation. Madhavi Arora, chief economist at Emkay Global Financial Services, said the direct impact of this hike will be a muted 15 basis points on consumer price inflation, but the indirect impact will be larger. "The hikes are not enough but could be the start of multiple staggered hikes," she said.
India's retail inflation quickened to 3.48% in April, driven by dearer food prices, with the outlook clouded by risks from rising energy costs tied to the Middle East conflict. Prashant Vashisth, vice president at Moody's Indian arm ICRA, said India's petrol demand growth will be impacted, although the price hike is modest, but other fuel conservation steps such as work from home will dent demand growth.
Opposition leaders criticized the Modi government for the price hike and its timing, accusing the prime minister of delaying the hikes until the 2026 State Assembly Elections had passed. Mallikarjun Kharge, president of the Indian National Congress, said: "During elections, the Modi government behaves as if 'everything is normal.' Now, as the crisis escalates, Modi ji has started rattling the toy of Work From Home and fuel conservation."
Source: www.dw.com