Operators of truck fleets across India are bracing for fuel rationing and the first significant increase in diesel prices in years, a move that will end a period of relative stability that has continued since the war in the Persian Gulf.
The world’s third-largest oil importer is among the countries hardest hit by the trade turmoil in West Asia as the conflict continues for an eighth week – but it has not suffered the widespread price increases at the pump seen elsewhere, as governments protect consumers and state-run refiners absorb losses.
The situation could change after key regional elections are held next week, as pressure will increase and the war will drag on. The hikes by state-owned refiners will add to inflationary pressure on the economy. Truck drivers already report widespread informal rationing that forces them to make frequent stops to fill their tanks, causing delivery delays.
“After the elections, we are going to see a rise in diesel prices,” said Shailendra Gupta, executive member of the truck drivers’ lobby group All India Motor Transport Congress. “Already around 10% of the fleet is idle, this number could rise to 30% if fuel prices were increased.”
The pumps have withdrawn the discount given earlier on monthly purchases above a certain limit, he said.
Most of India’s freight moves by road – trucks account for about 70% of freight traffic – so diesel is the lifeline of the economy. Private player Nayara Energy Ltd has already raised pump prices and Reliance Industries Ltd and its partner BP Plc have cut supplies. Nevertheless, any significant increase in retail fuel prices, coupled with a weak exchange rate, will impact the broader economy.
Ajay Bansal, president of the All India Petroleum Dealers Association, said there is currently no rationing at outlets in the state – although they are feeling the impact of other restrictions.
“With private refiners reducing sales, there has been an abnormal increase in demand at the pumps of state retail outlets, which has led to shortages in some outlets and they have been forced to cut sales,” Bansal said.
The government has urged citizens to avoid panic buying of fuel and said on Sunday that retail shops were operating normally. It said there has been no increase in the regular retail prices of petrol or diesel. India has already reduced local taxes on petrol and diesel and increased export duties to protect consumers.
Economists at Standard Chartered Plc, led by Anubhuti Sahay, said in a report last Friday that if crude averages $95 a barrel this fiscal year, the government will be forced to raise pump prices. ₹With high prices of LPG at Rs 8-15 per liter for petrol and diesel. Even if crude averages $85-$90 per barrel, retail fuel prices may still need to rise ₹3-7 per litre, he said.
On Monday, Brent crude was trading around $96 per barrel. The last comprehensive pump price hike in India was in 2022.
