Govt Says Rs 3 Fuel Price Hike Only a Fraction of Massive Oil Losses Amid Global Crude Surge

New Delhi, May 15: The Centre on Friday defended the recent Rs 3 per litre increase in petrol and diesel prices, describing it as only a small adjustment compared to the massive financial burden currently being absorbed by public sector oil marketing companies amid soaring global crude oil prices.

Senior government officials said the hike was merely “a drop in the bucket” when compared to the actual under-recoveries being faced by Indian Oil Corporation (IOC), Bharat Petroleum Corporation Limited (BPCL), and Hindustan Petroleum Corporation Limited (HPCL) due to crude prices crossing the $100 per barrel mark.

According to official sources, petrol under-recoveries are currently estimated at nearly Rs 26 per litre, while diesel losses have climbed to around Rs 82 per litre. In this context, the modest Rs 3 increase in retail prices offsets only a very small portion of the losses that state-run oil companies continue to absorb.

Government Shielding Consumers From Global Oil Shock

Officials indicated that the government’s broader strategy is aimed at protecting consumers from the full impact of the global energy crisis triggered by escalating tensions in West Asia.

Sources revealed that the public sector oil companies, along with the government, are together absorbing losses estimated at nearly Rs 1,000 crore every day to prevent steep increases in fuel prices at petrol pumps.

The Centre’s position, officials said, is that Indian households should not be forced to bear the entire burden of rising international crude oil prices through sudden and sharp retail fuel hikes.

Government sources warned that any major increase in petrol and diesel prices would have widespread inflationary consequences across the economy. Higher fuel costs would raise transportation expenses, increase food prices, and place additional pressure on household budgets at a time when domestic demand remains sensitive.

Agriculture Sector Also Being Protected

Officials further pointed out that the government is simultaneously protecting farmers from the impact of global commodity price shocks by continuing to provide large fertiliser subsidies.

According to sources, the fertiliser subsidy burden currently stands at around Rs 2.25 lakh crore, reflecting the government’s effort to shield the agriculture sector from rising global input costs.

The overall policy approach, officials said, is focused on gradually reducing fuel consumption, improving energy efficiency, and lowering dependence on imported energy rather than imposing abrupt price shocks on consumers.

Sources added that Prime Minister Narendra Modi has consistently advocated policies aimed at reducing fuel consumption patterns and cutting import dependence as part of India’s long-term energy strategy.

Rising Import Burden a Major Concern

Government officials described the present situation as a “massive twin drain” on the economy caused by elevated crude oil and gold imports.

India’s annual crude oil import bill is currently estimated at around Rs 12-15 lakh crore. Officials noted that every $10 rise in crude oil prices increases the country’s import burden by nearly $13-14 billion.

The current spike in oil prices has largely been driven by the escalating US-Iran conflict and disruptions around the Strait of Hormuz — one of the world’s most critical energy transit routes through which nearly 20 per cent of global energy exports pass during normal times.

“India has zero control over these geopolitical developments,” a senior source said, adding that the government is consciously trying to avoid transferring the entire external shock directly to Indian consumers.

Economy Better Positioned Than Earlier Crises

Officials also argued that India’s macroeconomic position remains far stronger than during the 2012-13 economic stress period.

They pointed out that the country’s current account deficit remains below 1.5 per cent of GDP, compared to nearly 5 per cent during the earlier crisis. Inflation, too, remains relatively under control despite global economic volatility.

Meanwhile, Indian Oil officials assured that fuel availability remains stable across the country. Refineries are currently operating round the clock at maximum capacity to ensure uninterrupted supplies.

Officials further said India currently holds crude oil stocks sufficient for nearly 60 days — the maximum level required for refinery operations — and there is no immediate concern regarding fuel production or supply disruptions.

Team Maverick.