‘Why did the govt slash petrol prices despite crude at $100 bbl? Hardeep Puri a ...
As the global energy landscape grapples with the compounding pressures of the ongoing war between Iran and the alliance of Israel-US, global crude oil prices have seen a near unprecedented surge. With Brent crude persisting in the triple-digit territory,Union Minister for Petroleum and Natural Gas Hardeep Singh Puri on Friday come forward to explain the fiscal gymnastics undertaken by the Indian government to keep the average Indian consumer protected from global price shocks.Fresh volatility in the Middle East due to attack on key oil infrastructure facilities across the Gulf, a prolonged Russia-Ukraine war have added more stress to the already fragile global situation.
As the oil prices continue to soar, the Indian government has moved to decouple domestic fuel retail prices from the surging international benchmarks.
Institutions to bear the brunt: The insulation strategy
The global energy market has been on edge following recent supply disruptions triggered by heightened tensions between the U.S., Israel, and Iran. In a detailed statement, Minister Puri noted that international crude prices jumped from approximately $70/barrel to $122/barrel in a single month.
As per Puri, while nations in South East Asia and North America saw pump prices soar by up to 50%, the Indian government opted for a more “bold” fiscal intervention. Notably the ongoing war has led to price increases of around 30%-50% in South East Asian countries, 30% in North American countries, 20% in Europe and 50% in African countries.
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According to Puri, in this situation, the Modi government had two choices: either increase prices drastically for citizens as seen in countries in the west of Bharat or make government institutions bear the brunt of its finances.
As apparent from recent moves made by the government of India, the Modi administration chose the latter, taking a significant hit on taxation revenues to mitigate the under-recoveries of oil marketing companies (OMCs).
As per Puri, the Indian government is taking a heavy loss of ₹24 per litre for petrol and ₹30per litre for diesel to maintain consumer friendly prices of critical oil resources across the country which has burned a significant hole in the government’s tax revenue.
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To further balance the scales, the government has simultaneously levied an export tax on domestic refineries to ensure that the benefit of Indian-refined fuel remains focused on the domestic market rather than being diverted to high-priced foreign markets.
Russian oil is back in the picture?
Following supply disruptions caused by the U.S.–Israel conflict involving Iran, New Delhi is actively rebuilding its energy bridge with Moscow.
According to reports from Reuters, India is currently in talks to resume Russian LNG exports to stabilise the power and industrial sectors. As per reports, Russian oil could soon account for nearly 40% of India’s total import.
This pivot marks a tactical reversal. While New Delhi had previously scaled back Russian purchases under the pressure of U.S. tariffs and sanctions, the current price environment has necessitated a return to Siberian crude.
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