Reserve Bank of India (RBI) Governor Sanjay Malhotra has hinted at a likely increase in domestic petrol and diesel prices if the ongoing conflict in West Asia, involving the US, Israel, and Iran, persists. His remarks were made during a Swiss National Bank-International Monetary Fund conference in Switzerland, emphasizing that the central bank would consider data for further action, especially if the oil price shock becomes deeply entrenched.
Malhotra's warning follows an appeal from Prime Minister Narendra Modi to the nation, urging citizens to reduce petrol and diesel consumption. Additionally, PM Modi advised against purchasing gold for one year, aiming to preserve India's crucial foreign exchange reserves amidst global economic uncertainties.
Government May Pass On Rising Costs
Speaking on the potential for price adjustments, Governor Malhotra stated, "If this is to continue for a longer period of time, it is just a matter of time before the government will pass on some of the price increases." This suggests that while oil marketing companies (OMCs) have absorbed some costs, and excise duties were previously reduced, sustained high global crude prices could necessitate a change in retail fuel rates.
OMCs Face Significant Strain
Echoing concerns about the financial viability of current pricing, Union Minister for Petroleum and Natural Gas Hardeep Singh Puri highlighted the immense pressure on public oil marketing companies. Puri noted that OMCs were incurring substantial losses, stating they "wouldn't be able to sustain losses of ₹1,000 crore per day." He added that while companies are absorbing costs to insulate consumers, "at some stage, government would have to take a call."
The Minister dismissed speculation that a fuel price hike was postponed due to recent assembly elections, clarifying that prices have remained unchanged since 2022 despite multiple polls. Puri stressed that India has been unique in maintaining stable fuel prices for four years, even as global crude oil prices remained volatile, with Brent crude trading over $106 per barrel at the time of the report.
Ensuring Supply Security
Despite the financial strain and global disruptions, Puri assured that India faces no immediate issues regarding energy supply. He confirmed that the country holds 60 days of crude and LNG inventories, alongside 45 days of LPG stocks. The government is also actively working to increase strategic reserves, with one OMC reportedly acquiring hundreds of acres for additional storage capacity.
Currently, petrol prices stand at ₹94.74 per litre and diesel at ₹87.81 per litre across India, remaining constant despite the fluctuating international oil market.