India Navigates Volatile Global Oil Market
As global crude oil prices have surged past the significant $100 per barrel mark, India has largely succeeded in insulating its domestic consumers from the direct impact of these international fluctuations. Through a combination of strategic import diversification and proactive fiscal measures, the government has worked to maintain stability in retail petrol and diesel prices across the country.
Global Crude Prices Under Pressure
On April 22, Brent crude oil prices breached $100 a barrel for the first time in over two weeks, fueled by robust demand signals and escalating geopolitical tensions, particularly in the Middle East. Concerns over supply disruptions, including incidents in the Strait of Hormuz which handles a substantial portion of global oil flows, have kept risk premiums elevated. The Indian crude oil basket mirrored this trend, nearly doubling from approximately $63 per barrel in January to an average of $116 per barrel by April, primarily due to the ongoing West Asia conflict.
Government's Multi-pronged Strategy
To mitigate the impact of rising global prices, the Indian government has implemented several key measures:
- Import Diversification: India has significantly diversified its crude oil and LPG imports, notably increasing purchases from Russia. In March, India imported a record 2.25 million barrels per day of oil from Russia, accounting for nearly 50% of its total imports. Imports from Venezuela have also seen an uptick.
- Excise Duty Adjustments: The Centre reduced the excise duty on petrol and diesel by Rs 10 per litre, effectively bringing the duty on diesel to zero and on petrol to Rs 3 per litre. This move aimed to absorb some of the international price increases rather than passing them directly to consumers.
- Strategic Reserves: The nation's strategic oil reserves are reported to have three-fourths crude availability, providing a buffer against supply shocks.
- Windfall Tax: A windfall tax has been imposed on the export of diesel and aviation turbine fuel (ATF), aimed at discouraging exporters from taking undue advantage of price differences and ensuring domestic supply.
Impact and Future Outlook
While retail prices for petrol and diesel have largely remained stable, consumers have faced hikes in LPG cylinders, industrial diesel, and premium petrol variants. The Ministry of Petroleum and Natural Gas has denied reports of an imminent hike in petrol and diesel prices post-state elections, labeling such claims as 'fake and mischievous.'
The Inflationary Pressure
Despite efforts to stabilize fuel prices, the broader economy has felt inflationary pressure. Consumer Price Index (CPI)-based inflation edged up to 3.4% in March 2026 from 3.21% in February, with fuel inflation contributing significantly due to LPG price increases. Wholesale Price Index (WPI) inflation also reached a 21-month high of 3.88% in March, driven by fuel, power, and manufactured goods. Higher oil prices, coupled with a depreciating rupee, pose risks to growth prospects, inflation control, and the current account deficit.
The Road Ahead for Fuel Prices
Industry players suggest that a sustained crude level above $100 per barrel could test India's price stability. Oil marketing companies (OMCs) are reportedly incurring daily under-recoveries of Rs 1,500-Rs 2,000 crore. Analysts from Moody's Ratings indicated that losses of this magnitude are unsustainable, suggesting that if energy prices remain high, the government might need to introduce further measures, such as compensation for OMCs or gradual retail price adjustments, in coordination with states.