India has raised retail petrol and diesel prices by 3 rupees per litre — more than 3% — Delhi retailers confirmed Friday, the country’s first fuel price hike in four years and a signal that even strategic oil reserves and domestic refining have proven inadequate to absorb the cost shock from the Middle East war.
Diesel in Delhi will now cost Rs.90.67 a litre and petrol Rs.97.77, increases of 3.4% and 3.2% respectively from Rs.87.67 and Rs.94.77. State-run Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp, which together control more than 90% of India’s 103,000 fuel stations, fix prices in tandem.
Global oil prices spiked above $120 a barrel after the closure and severe disruption of the Strait of Hormuz by the war that began with US-Israeli attacks on Iran, before pulling back to around $100–$105. India is one of the last major economies to pass on the costs to consumers.
An Oil Ministry official said in April that retailers were losing about Rs.100 per litre on diesel and Rs.20 per litre on petrol. Analysts and opposition parties said state retailers had delayed price moves through key state elections that concluded earlier this month, with Modi’s BJP winning two of four states.
Madhavi Arora, chief economist at Emkay Financial Services, said the direct CPI impact will be about 15 basis points though the indirect impact will be larger. Last Sunday Prime Minister Narendra Modi urged fuel conservation measures including work-from-home practices, travel limits and import curbs to ease pressure on foreign exchange reserves.
The hike validates the cost pressures Sri Lanka has faced from the same war. AKD told Parliament this week that the actual CPC diesel cost has hit Rs.720 per litre, with the Treasury absorbing most of the difference through a Rs.100-per-litre diesel subsidy that the IMF has flagged for review.
