India’s state-run fuel retailers have raised gasoline and diesel prices for the fourth time in 10 days in May this year. The price hike is in response to disruptions in global energy markets, a move that worsens inflationary risks in the economy.
According to company statements and website data, Indian oil majors, Bharat Petroleum Corp. and Hindustan Petroleum Corp, which together control about 90 percent of South Asian country’s fuel retail market, increased gasoline prices in New Delhi by 2.6 percent to 102.12 rupees ($1.07) a litre and for diesel by 2.9 percent to 95.20 rupees.
While oil prices have been raised across India, pump prices vary from state to state due to local taxes. The latest hike brings cumulative increases over the last 10 days to 7.8 percent for gasoline and 8.6 percent for diesel. The prices for the fuels are at the highest level since May 2022.
India deregulated retail fuel pricing years ago, but Prime Minister Narendra Modi’s government had effectively frozen pump prices for nearly four years.
That policy became increasingly difficult to sustain as the Iran war sent crude prices sharply higher and the rupee weakened against the dollar, deepening losses for state-run refiners.
A surge in fuel consumption during the agricultural harvest season and increasing disparities with non-state retailers have also strained inventories, adding to pressure to raise prices.
Even after the latest adjustment, government-owned retailers are still selling fueling below market-linked levels. “Oil marketing companies have been posting losses which have now narrowed to slightly less than 6 billion rupees daily, from 10 billion rupees,” joint secretary in the oil ministry told reporters in New Delhi, Sujata Sharma said during a media briefing last week.
Private operators such as Shell Plc are charging more than 116 rupees a liter for gasoline and more than 127 rupees for diesel at outlets across India. “We expect more action to come by through another retail fuel price hike and a hike in liquefied petroleum gas prices.
Oswal Financial Services Ltd. said. “The higher prices of fuel would have a bearing on inflation, which we expect to climb to 5.7 percent on year for the current financial year as against the Reserve Bank of India expectation of 4.6 percent,” said Radhika Piplani, an economist at Motilal.
The Reserve Bank of India’s Monetary Policy Committee is scheduled to meet June 3-5 for an interest-rate decision. Sonal Varma, Nomura Holding Inc.’s chief economist for Asia ex-Japan, expects the central bank to adopt a wait-and-watch approach.
The fuel price hikes will have a cumulative impact of 38 basis points on the consumer price index, she said.
