Editorial: India’s quest for fuel sufficiency

Fuel prices in India, which imports 80 per cent of its oil requirements, went past the Rs 100 per litre mark last month. This is a record high for Asia’s third-largest economy since the 133-day long break in rate revision on March 22. As many political observers had forecast early on, the Centre waited for the assembly polls being held in various States to come to an end before announcing this backbreaking hike in fuel prices. The upward trajectory of liquid gold has seen prices rise 14 times since March 22, with an 80 paise hike for every litre of petrol and diesel effected on Wednesday thereby, taking the total increase in rates in the last 16 days to Rs 10 per litre.

The fact that such price hikes hit the common man the hardest goes without saying. Apart from the cost of commuting, what has also been hit is the cost of keeping the fire in one’s hearth burning. The price of non-subsidised LPG cylinder has also spiked by a whopping Rs 50 per cylinder. Presently, a non-subsidised 14.2 kg Indane LPG cylinder costs Rs 965.5. Just for comparison, this same cylinder cost Rs 734 in January 2020 just before the onslaught of the pandemic kicked in.

The Centre has countered dissent by saying it had no role to play in the hike as the onus of it fell upon Oil Marketing Companies (OMCs). In the same breath, it has also pointed to the Ukraine-Russia war, that had caused the crude oil prices to soar. The price of Brent crude oil breached $116 a barrel last month, while supply disruptions have impacted global prices of wheat, soybean, fertiliser and metals like copper, steel and aluminium – raising worries about prices and economic recovery.

Refiners in India, the world’s third biggest oil importer and consumer, have been snapping up Russian oil through spot tenders since the war broke out, taking advantage of deep discounts as other buyers back away. India has purchased at least 13 million barrels of Russian oil since February 24, compared with nearly 16 million barrels in all of 2021.

India consumes nearly 211.6 mn tonnes of oil every year. However, less than 35 mn tonnes of that oil is produced here. Our reliance on oil imports, which borders on 85%, is due to the absence of adequate reserves in India and not having explored new oil fields locally. The bulk of our imports come from Iraq, Saudi Arabia, UAE, the US and Canada. Reliance on imports have driven up our fuel prices. The OPEC+ nations and Russia are partly to blame for the situation. Public sector Oil Marketing Companies revise the retail prices of petrol and diesel in India on a daily basis, as per changes in the price of global crude oil. But that’s just one side of the story. More than half of what we pay (54%) in fuel prices comprises excise duty and taxes. As opposed to the developed nations, Indians pay the highest tax on fuel at 260% on the base price of petrol. Compare this to Germany and Italy which cough up 65%, UK which pays 62%, Japan which pays 45% and the US which pays 20%.

Experts believe the States and Centre can intervene to make fuel cheaper. India will need to find newer alternative markets to keep fuel prices in check, while circumnavigating US sanctions. It must seriously consider regulating prices in extreme situations. In the long term, India must explore new reserves and build new oil fields. Our transition to eco-friendly sources of energy must be speeded up before we start to run on fumes.