India Decides to Keeps Retail Prices Unchanged Despite Global Oil Shock

India's Petroleum and Natural Gas Minister Hardeep Singh Puri said on Friday that the government took a hit on its own finances to "safeguard" the Indian consumer from the rising crude costs in the wake of the US-Iran War.

In a social media post, Puri noted that the global crude prices surged over the last month from $70/barrel to around $122 per barrel. Crude futures at Brent were trading around $107 per barrel on Friday morning (IST).

"Consequently, petrol and diesel prices for consumers have gone up all over the world. Prices have increased by around 30%-50% in South East Asian countries, 30% in North American countries, 20% in Europe and 50% in African countries," the Indian minister said.

He said that the Indian government was faced with two choices, either increase the retail prices or bear the brunt on government finances to insulate the Indian public from international volatility.

"Government has taken a huge hit on its taxation revenues to ensure very high losses of oil companies (approximately 24 Rs/litre ($0.25) for petrol and 30 Rs/litre ($0.32) for diesel) at this time of sky high international prices are reduced. At the same time, export tax has been levied as international prices of petrol and diesel have skyrocketed and any refinery exporting to foreign nations will have to pay export tax," Puri announced.

Retail fuel prices in India have remained largely the same since late 2022-2023, with the price of retail petrol at a Delhi pump being around Rs 94/litre ($0.99/litre). At the time, the higher excise duty on fuel amid muted global crude prices helped to bolster the government coffers.

Finance Minister Nirmala Sitharaman posted on X that the central excise duty on petrol and diesel for domestic consumption has been reduced by ₹10 ($0.11) per litre each.

"Further, duties have been imposed on exports of diesel at Rs 21.5 ($0.23) per litre and Aviation Turbine Fuel (ATF) at Rs 29.5 ($0.31) per litre. This will ensure adequate availability of these products for domestic consumption. The Parliament has been notified about the same," Sitharaman said.

According to a Finance Ministry's gazette notification late on Thursday evening, refined fuel exports to Nepal, Bangladesh, Bhutan and Sri Lanka have been exempted from the export tax, which kicked in last evening itself.

Energy security has remained India's foremost concern since the start of the US-Iran war and the consequent disruption of supply chains in the Strait of Hormuz, from where India used to source around 40-50% of its old demand and over 80% of its LPG supplies till last month.

After multiple telephone calls between Prime Minister Narendra Modi and Iranian President Masoud Pezeshkian as well as calls between External Affairs Minister S Jaishankar and Foreign Minister Seyed Abbas Aragchi this month, the Iranian top diplomat said on Thursday that the Strait of Hormuz wasn't blocked for friendly countries, which include China, Russia, India, Iraq and Pakistan.

Meanwhile, in a statement on Thursday, the Indian Petroleum and Natural Gas ministry assured the citizens that it had secured around 60 days of crude availability and a month of LPG supplies through diverse sources, including Russia.

Russian crude supplies to India have rebounded since the start of the Middle East war, expected to average around 1.8 million barrels per day (bpd) to 2 million bpd in March, according to ship-tracking data from various agencies. Further, reports suggest that Indian refiners have booked around 60 million bdp of Russian crude for April delivery.

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India Decides to Keep Domestic Prices Unchanged Despite Global Oil Shock