India’s consumers — hit with the first fuel price hike in four years — will likely face more such rises in the near term, as the government grapples with the economic impact of a months-long conflict in the Persian Gulf.
After weeks of speculation, India’s state-owned refiners finally announced an increase in diesel and gasoline prices on Friday — though only by 3 rupees (a little over 3 US cents) a liter, a level too modest to offset oil prices above $100 a barrel or to curb demand.
Further hikes will be allowed in order to close that gap, but they will be spread over time in order to limit the impact for ordinary households, according to people familiar with the matter. A further 2-4 rupee increase is expected soon if crude prices remain high, they added, asking not to be named as they are not authorized to speak with the media.
State-owned refiners have indicated they would need add closer to 15 to 20 rupees a liter in order to cope with the current crisis.
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India’s oil ministry didn’t immediately reply to a request for comment.
“This is a conundrum several governments around the world are facing,” Vandana Hari, founder of analysis firm Vanda Insights said. “It’s time to tighten our belts. More fuel price hikes will need to come if the situation doesn’t ease soon.”
State fuel retailers in India control 90% of the country’s outlets, and are on paper free to set rates. Yet government is a majority shareholder in these large refiners, and has kept pump prices frozen since March 2024 — choosing to shield households at the cost of squeezing refiners’ margins.
Oil Minister Hardeep Puri said earlier this week that state refiners were losing 10 billion rupees a day by selling fuels below market prices. Even after the price hike, the companies are still losing half of that sum on sales of diesel, gasoline and liquefied petroleum gas, said Prashant Vasisht, senior vice president with rating agency ICRA Ltd.
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In a bid to help limit those losses and pain for the public purse, Modi’s government has also stepped up efforts to curb fuel consumption. The prime minister used a rare weekend appeal to urge citizens to work from home when possible, use public transport and switch to electric vehicles. Delhi’s local government has asked employees to work remotely two days a week, stagger office hours and shift more meetings online to ease congestion and conserve fuel.
India deregulated gasoline prices in 2010 and diesel in 2014, with refiners shifting to daily revisions in 2017. But effective daily adjustments were suspended in April 2022 as the government leaned on state retailers to shield consumers from global volatility.
