India expects higher gasoline and diesel prices after election

Asia’s third-largest economy, which imports 80% of its oil needs, faces retail price inflation that remains above the central bank’s 6% tolerance limit

India said it would hike gasoline and diesel prices next week for the first time in more than four months as global crude prices soared after China invaded Ukraine. Russia last week, government officials said.

Asia’s third-largest economy, which imports 80% of its oil needs, faces retail price inflation that remains above the central bank’s 6% tolerance limit, with companies passing on a hike of nearly 40% of crude prices since November.

State-owned oil companies, which control the domestic market, have not raised prices since November. 4, aimed at helping the ruling Bharatiya Janata party in crucial state assembly elections, including in the most populous state of Uttar Pradesh.

“Oil companies would be free to raise prices incrementally once the elections are over on March 7,” a senior government official told Reuters.

Rising fuel prices could lead to protests, but with important national elections the political risk for Prime Minister Narendra Modi has been reduced.

Opposition parties will push for fuel tax cuts when Parliament meets from March 14.

Oil prices surged after Russia invaded Ukraine on Feb. 24, with Brent rising above $116 a barrel on Thursday.

Supply interruptions

Supply disruptions have hit global prices for wheat, soybeans, fertilizers and metals like copper, steel and aluminum, raising concerns about prices and economic recovery.

State oil companies have told the government they need a price increase of 10 to 12 rupees (13 to 15 cents) per liter for petrol and diesel, a second official said.

A senior official from a state-owned oil marketing company confirmed they were facing difficulties, although he declined to give figures. “We are suffering huge losses,” he said.

The government was unlikely to cut fuel taxes to soften the blow, at least before the end of March 31 of the fiscal year, given the impact of this on state revenue, said a another senior government official familiar with the budget.

The federal and state governments, which collect more than 100% taxes on the base price of gasoline and diesel, reduced factory entry fees and sales tax on petroleum products in November , after a public outcry.

  • Reuters with additional editing by George Russell

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george russell

George Russell is a Hong Kong-based freelance writer and editor who has lived in Asia since 1996. His work has appeared in the Financial Times, Wall Street Journal, Bloomberg, New York Post, Variety, Forbes, and South China Morning Post. . .

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